Universität zu Köln

Bredemeier, Christian ORCID: 0000-0002-7358-6992, Juessen, Falko and Schabert, Andreas ORCID: 0000-0002-4924-9937 (2022). Why are fiscal multipliers moderate even under monetary accommodation? European Economic Review EER, 141. p. 103970. AMSTERDAM: ELSEVIER. ISSN 1873-572X

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Abstract

Estimated fiscal multipliers for the US are typically moderate, despite evidence of the Fed lowering, rather than raising, interest rates after government spending hikes. We rationalize these puzzling observations building on the imperfect substitutability of assets. We find that interest rates important for private borrowing/saving do not follow the response of the monetary policy rate, which is reflected by rising liquidity premia after spending hikes. A model with a structural specification of asset liquidity can replicate these findings and predicts moderate output effects of fiscal expansions even when monetary policy rates fall or are fixed at the zero lower bound.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Bredemeier, Christian UNSPECIFIED orcid.org/0000-0002-7358-6992 UNSPECIFIED Juessen, Falko UNSPECIFIED UNSPECIFIED UNSPECIFIED Schabert, Andreas UNSPECIFIED orcid.org/0000-0002-4924-9937 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-574445
DOI:	10.1016/j.euroecorev.2021.103970
Journal or Publication Title:	European Economic Review EER
Volume:	141
Page Range:	p. 103970
Date:	2022
Publisher:	ELSEVIER
Place of Publication:	AMSTERDAM
ISSN:	1873-572X
Language:	English
Faculty:	Central Institutions / Interdisciplinary Research Centers
Divisions:	Weitere Institute, Arbeits- und Forschungsgruppen > Center for Macroeconomic Research (CMR)
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language GOVERNMENT SPENDING MULTIPLIERS; LIQUIDITY PREMIUM; POLICY; STIMULUS; EXPECTATIONS; PREFERENCES; SHOCKS; MONEY; DEBT Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/57444