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Comment on Eggertsson, "What fiscal policy is effective at zero interest rates?"


  • Lawrence J. Christiano


Gauti B. Eggertsson's paper (published in NBER Macroeconomics Annual 2010) represents an important contribution to the analysis of fiscal policy in the New Keynesian model when the zero lower bound on the nominal interest rate is binding. The paper accomplishes a great deal. It analyzes two types of taxes on capital and labor, the investment tax credit, a sales tax, and two types of government spending. It deserves to be an important reference on fiscal policy in a binding zero lower bound. In my discussion, I focus on the subset of Eggertsson's results that initially surprised me and that I think will surprise many other readers too.

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  • Lawrence J. Christiano, 2010. "Comment on Eggertsson, "What fiscal policy is effective at zero interest rates?"," FRB Atlanta CQER Working Paper 2010-06, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedacq:2010-06

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    1. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367 Elsevier.
    2. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
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