Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal stimulus and distortionary taxation

Contents:

Author Info

  • Drautzburg, Thorsten
  • Uhlig, Harald

Abstract

We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (Smets and Wouters, 2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound and the capital. The stimulus results in negative welfare effects for unconstrained agents. The constrained agents gain, if they discount the future substantially. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/45806/1/661862313.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-037.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:zbw:zewdip:11037

Contact details of provider:
Postal: L 7,1; D - 68161 Mannheim
Phone: +49/621/1235-01
Fax: +49/621/1235-224
Email:
Web page: http://www.zew.de/
More information through EDIRC

Related research

Keywords: Fiscal Stimulus; New Keynesian model; liquidity trap; zero lower bound; fiscal multiplier;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Davig, Troy & Leeper, Eric M., 2011. "Monetary-fiscal policy interactions and fiscal stimulus," European Economic Review, Elsevier, Elsevier, vol. 55(2), pages 211-227, February.
  2. Ricardo Reis & Hyunseung Oh, 2011. "Targeted Transfers and the Fiscal Response to the Great Recession," Discussion Papers, Columbia University, Department of Economics 1011-10, Columbia University, Department of Economics.
  3. Correia, Isabel & Farhi, Emmanuel & Nicolini, Juan Pablo & Teles, Pedro, 2011. "Unconventional Fiscal Policy at the Zero Bound," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8193, C.E.P.R. Discussion Papers.
  4. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research, National Bank of Belgium 35, National Bank of Belgium.
  5. Todd B. Walker & Nora Traum & Eric M. Leeper, 2011. "The Fiscal Multiplier Morass: A Bayesian Perspective," 2011 Meeting Papers 583, Society for Economic Dynamics.
  6. Eric M. Leeper & Todd B. Walker & Shu-Chun Susan Yang, 2009. "Government Investment and Fiscal Stimulus in the Short and Long Runs," NBER Working Papers 15153, National Bureau of Economic Research, Inc.
  7. Leeper, Eric M. & Walker, Todd B. & Yang, Shu-Chun S., 2010. "Government investment and fiscal stimulus," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(8), pages 1000-1012, November.
  8. Eric M. Leeper & Nora Traum & Todd B. Walker, 2011. "Clearing Up the Fiscal Multiplier Morass," NBER Working Papers 17444, National Bureau of Economic Research, Inc.
  9. Mathias Trabandt & Harald Uhlig, 2009. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," NBER Working Papers 15343, National Bureau of Economic Research, Inc.
  10. Cosmin Ilut & Martin Schneider, 2012. "Ambiguous Business Cycles," Working Papers, Duke University, Department of Economics 12-06, Duke University, Department of Economics.
  11. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2009. "When is the government spending multiplier large?," NBER Working Papers 15394, National Bureau of Economic Research, Inc.
  12. John Cogan & Tobias Cwik & John Taylor & Volker Wieland, 2009. "New Keynesian Versus Old Keynesian Government Spending Multipliers," Discussion Papers, Stanford Institute for Economic Policy Research 08-030, Stanford Institute for Economic Policy Research.
  13. Kimball, Miles S, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(4), pages 1241-77, November.
  14. Michael Kumhof & Dirk Muir & Carlos de Resende & Jan in ‘t Veld & René Lalonde & Davide Furceri & Annabelle Mourougane & John Roberts & Stephen Snudden & Mathias Trabandt & Günter Coenen &, 2010. "Effects of Fiscal Stimulus in Structural Models," IMF Working Papers 10/73, International Monetary Fund.
  15. Robert E. Hall, 2011. "The Long Slump," American Economic Review, American Economic Association, American Economic Association, vol. 101(2), pages 431-69, April.
  16. Clemens, Jeffrey & Miran, Stephen, 2010. "The effects of state budget cuts on employment and income," MPRA Paper 38715, University Library of Munich, Germany.
  17. Gust, Christopher & López-Salido, J David & Smith, Matthew E, 2012. "The Empirical Implications of the Interest-Rate Lower Bound," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9214, C.E.P.R. Discussion Papers.
  18. Kaushik Mitra & James Bullard, . "Learning About Monetary Policy Rules," Discussion Papers, Department of Economics, University of York 00/41, Department of Economics, University of York.
  19. Juillard, Michel, 1996. "Dynare : a program for the resolution and simulation of dynamic models with forward variables through the use of a relaxation algorithm," CEPREMAP Working Papers (Couverture Orange) 9602, CEPREMAP.
  20. Blanchard, Olivier J & Cottarelli, Carlo & Spilimbergo, Antonio & Symansky, Steven, 2009. "Fiscal Policy for the Crisis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7130, C.E.P.R. Discussion Papers.
  21. Eichenbaum, Martin & Fisher, Jonas D.M., 2007. "Estimating the frequency of price re-optimization in Calvo-style models," Journal of Monetary Economics, Elsevier, Elsevier, vol. 54(7), pages 2032-2047, October.
  22. Eric M. Leeper, Michael Plante, Nora Traum, 2009. "Dynamics Of Fiscal Financing In The United States," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2009-012, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  23. Gauti Eggertsson, 2010. "The paradox of toil," Staff Reports, Federal Reserve Bank of New York 433, Federal Reserve Bank of New York.
  24. R. Anton Braun & Lena Mareen Körber & Yuichiro Waki, 2012. "Some unpleasant properties of log-linearized solutions when the nominal rate is zero," Working Paper, Federal Reserve Bank of Atlanta 2012-05, Federal Reserve Bank of Atlanta.
  25. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 33-53, March.
  26. Trabandt, Mathias & Uhlig, Harald, 2011. "The Laffer curve revisited," Journal of Monetary Economics, Elsevier, Elsevier, vol. 58(4), pages 305-327.
  27. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 54-77, February.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. On the ineffectiveness of a fiscal stimulus
    by Economic Logician in Economic Logic on 2012-01-09 15:16:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Economic Logic blog

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:11037. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.