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The effect of fiscal policy and forward guidance with preferences over wealth

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  • Rannenberg, Ansgar

Abstract

I examine how the effects of fiscal policy and forward guidance are shaped by preferences over wealth calibrated based on microeconomic evidence on household saving behavior and individual discount rates. The contractionary effect of a permanent cut in government expenditure implemented during a period when monetary policy is constrained becomes larger due to smaller consumption crowding. Furthermore, the assumption much reduces the effect of forward guidance on the future policy interest rate.

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  • Rannenberg, Ansgar, 2017. "The effect of fiscal policy and forward guidance with preferences over wealth," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168070, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168070
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    Cited by:

    1. Rannenberg, Ansgar, 2021. "State-dependent fiscal multipliers with preferences over safe assets," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 1023-1040.

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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