When is the government spending multiplier large?
AbstractWe argue that the government spending multiplier can be very large when the nominal interest rate is constant. We focus on a natural case in which the interest rate is constant, which is when the zero lower bound on nominal interest rates binds. For the economies that we consider it is optimal to increase government spending in response to shocks that make the zero bound binding.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series CQER Working Paper with number 2010-01.
Date of creation: 2010
Date of revision:
Other versions of this item:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010.
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- Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
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