Universität zu Köln

Bredemeier, Christian, Juessen, Falko and Schabert, Andreas (2022). Why are fiscal multipliers moderate even under monetary accommodation? Eur. Econ. Rev., 141. 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 UNSPECIFIED UNSPECIFIED Juessen, Falko UNSPECIFIED UNSPECIFIED UNSPECIFIED Schabert, Andreas UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-574445
DOI:	10.1016/j.euroecorev.2021.103970
Journal or Publication Title:	Eur. Econ. Rev.
Volume:	141
Date:	2022
Publisher:	ELSEVIER
Place of Publication:	AMSTERDAM
ISSN:	1873-572X
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language GOVERNMENT SPENDING MULTIPLIERS; LIQUIDITY PREMIUM; POLICY; STIMULUS; EXPECTATIONS; PREFERENCES; SHOCKS; MONEY; DEBT Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/57444