Achieving two policy targets with one policy instrument: Heterogeneous expectations, countercyclical fiscal policy, and macroeconomic stabilization at the effective lower bound

Arbeitspapier

We explore the short-term macrodynamics of stabilization policy at the effective lower bound (ELB) of the nominal interest rate, in an environment characterized by heterogenous and endogenously time-varying private-sector output and inflation expectations driven by evolutionary dynamics. We show that at the ELB, fiscal policy conducted in accordance with a well-specified policy rule is particularly effective for purposes of macroeconomic stabilization. This is because fiscal interventions have both a direct effect on output and inflation (via aggregate demand formation) and an indirect effect on these same target variables, via the management of heterogenous and evolving expectations. As a result of the two channels through which it operates, and seemingly despite the logic of the Tinbergen (targets-instruments) principle, fiscal policy is thus revealed as a single policy instrument capable of achieving two policy goals.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: FMM Working Paper ; No. 86

Klassifikation und Themen

• Klassifikation: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Monetary Policy ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy‡
• Thema: Stabilization policy ; effective lower bound ; fiscal policy ; heterogeneous inflation and outputexpectations ; satisficing evolutionary dynamics

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lima, Gilberto Tadeu ; Setterfield, Mark ; da Silveira, Jaylson Jair
• Ereignis: Veröffentlichung
• (wer): Hans-Böckler-Stiftung, Macroeconomic Policy Institute (IMK), Forum for Macroeconomics and Macroeconomic Policies (FMM)
• (wo): Düsseldorf
• (wann): 2023

Weitere Informationen

• Handle: http://hdl.handle.net/10419/274240
• Letzte Aktualisierung: 2025-03-10T11:41:41+0100