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Small and orthodox fiscal multipliers at the zero lower bound

  • Braun, R. Anton

    ()

    (Federal Reserve Bank of Atlanta)

  • Korber, Lena Mareen

    ()

    (Federal Reserve Bank of Atlanta)

  • Waki, Yuichiro

    ()

    (The University of Queensland)

Does fiscal policy have large and qualitatively different effects on the economy when the nominal interest rate is zero? An emerging consensus in the New Keynesian literature is that the answer is yes. New evidence provided here suggests that the answer is often no. For a broad range of empirically relevant parameterizations of the Rotemberg model of costly price adjustment, the government purchase multiplier is about one or less, and the response of hours to a tax cut is either negative or close to zero.

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File URL: http://www.frbatlanta.org/documents/pubs/wp/wp1313.pdf
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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2013-13.

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Length: 49 pages
Date of creation: 01 Dec 2013
Date of revision:
Handle: RePEc:fip:fedawp:2013-13
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