Fiscal Consolidation in an Open Economy
AbstractThis paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences in the impact of fiscal shocks across these monetary regimes that depend both on the duration of the zero lower bound and on features that determine the responsiveness of inflation.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8955.
Date of creation: Apr 2012
Date of revision:
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Other versions of this item:
- Jesper Linde, 2012. "Fiscal Consolidation in an Open Economy," 2012 Meeting Papers 1087, Society for Economic Dynamics.
- Christopher J. Erceg & Jesper Lindé, 2012. "Fiscal consolidation in an open economy," International Finance Discussion Papers 1046, Board of Governors of the Federal Reserve System (U.S.).
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-DGE-2012-05-08 (Dynamic General Equilibrium)
- NEP-MAC-2012-05-08 (Macroeconomics)
- NEP-OPM-2012-05-08 (Open Economy Macroeconomic)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013.
"How big (small?) are fiscal multipliers?,"
Journal of Monetary Economics,
Elsevier, vol. 60(2), pages 239-254.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," NBER Working Papers 16479, National Bureau of Economic Research, Inc.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. VÃ©gh Gramont, 2011. "How Big (Small?) are Fiscal Multipliers?," IMF Working Papers 11/52, International Monetary Fund.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," CEP Discussion Papers dp1016, Centre for Economic Performance, LSE.
- Jordi Gal� & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
- Born, Benjamin & Juessen, Falko & Müller, Gernot, 2012.
"Exchange rate regimes and fiscal multipliers,"
CEPR Discussion Papers
8986, C.E.P.R. Discussion Papers.
- Luiz de Mello, 2013. "What Can Fiscal Policy Do in the Current Recession? A Review of Recent Literature and Policy Options," Hacienda Pública Española, IEF, vol. 204(1), pages 113-139, March.
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