Arbeitspapier
Seemingly irresponsible but welfare improving fiscal policy at the lower bound
In this paper, we evaluate the consequences of super-active fiscal policy rules - that is, rules that call for tax cuts and/or spending increases as the government's debt level rises - in a standard New Keynesian model subject to an occasionally-binding zero lower bound on the monetary policy interest rate. We show that such seemingly irresponsible, debt-financed fiscal stimulus at the ZLB, unbacked by any promise of future tax increases or spending cuts, not only improves economic stability by acting as an automatic stabilizer, but also, somewhat paradoxically, reduces government debt accumulation. When evaluated using a model-consistent measure of welfare, fiscal rules calibrated to the U.S. response during both the Great Recession and COVID recession, combined with a weak monetary policy response to inflation, outperform a monetary policy that responds strongly to inflation and reduce the frequency of episodes at the ZLB.
- Sprache
-
Englisch
- Erschienen in
-
Series: Sveriges Riksbank Working Paper Series ; No. 410
- Klassifikation
-
Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- Thema
-
automatic stabilizers
fiscal and monetary interactions
government debt
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Billi, Roberto M.
Walsh, Carl E.
- Ereignis
-
Veröffentlichung
- (wer)
-
Sveriges Riksbank
- (wo)
-
Stockholm
- (wann)
-
2022
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Billi, Roberto M.
- Walsh, Carl E.
- Sveriges Riksbank
Entstanden
- 2022
Ähnliche Objekte (12)
Nominal GDP targeting and the zero lower bound: Should we abandon inflation targeting?
The interest rate effects of government bond purchases away from the lower bound
A shadow rate without a lower bound constraint
Gains from wage flexibility and the zero lower bound
On the theoretical efficacy of quantitative easing at the zero lower bound
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The role of money in monetary policy at the lower bound
The monetary policy decision-making process and the term structure of interest rates
Testing for the Lucas Critique: A Quantitative Investigation
Nominal GDP targeting and the zero lower bound: Should we abandon inflation targeting?
The interest rate effects of government bond purchases away from the lower bound
A shadow rate without a lower bound constraint
Gains from wage flexibility and the zero lower bound
On the theoretical efficacy of quantitative easing at the zero lower bound
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The role of money in monetary policy at the lower bound
The monetary policy decision-making process and the term structure of interest rates
Testing for the Lucas Critique: A Quantitative Investigation
Nominal GDP targeting and the zero lower bound: Should we abandon inflation targeting?
The interest rate effects of government bond purchases away from the lower bound
A shadow rate without a lower bound constraint
Gains from wage flexibility and the zero lower bound
On the theoretical efficacy of quantitative easing at the zero lower bound
Schweden, 1 Krone
Schweden, 1 Krone
Geldschein, 1 Krona, 1874
Geldschein, 1 Krona, 1914
The role of money in monetary policy at the lower bound
The monetary policy decision-making process and the term structure of interest rates