Arbeitspapier
Fiscal Policy, Interest Rate Spreads, and the Zero Lower Bound
This paper questions unconventional fiscal policy effects when the monetary policy rate is at the zero lower bound. We provide evidence for the US that the spread between the policy rate and the US-LIBOR, which is more relevant for private sector transactions, increases with government expenditures. We introduce a corresponding spread into an otherwise standard macroeconomic model which reproduces this observation. The model predicts that the fiscal multiplier takes conventional values, regardless of whether the policy rate follows a standard feedback rule or is at its zero lower bound. Likewise, labor tax increases exert contractionary effects in both cases.
- Language
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Englisch
- Bibliographic citation
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Series: IZA Discussion Papers ; No. 8993
- Classification
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Wirtschaft
Business Fluctuations; Cycles
Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- Subject
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fiscal multiplier
tax policy
interest rate spreads
zero lower bound
liquidity premium
- Event
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Geistige Schöpfung
- (who)
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Bredemeier, Christian
Juessen, Falko
Schabert, Andreas
- Event
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Veröffentlichung
- (who)
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Institute for the Study of Labor (IZA)
- (where)
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Bonn
- (when)
-
2015
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Bredemeier, Christian
- Juessen, Falko
- Schabert, Andreas
- Institute for the Study of Labor (IZA)
Time of origin
- 2015
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