Determinants of fiscal multipliers revisited

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F20%3A10399929" target="_blank" >RIV/00216208:11230/20:10399929 - isvavai.cz</a>
Alternative codes found
RIV/00216224:14560/20:00114004
Result on the web
<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=7_X.vspw__" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=7_X.vspw__</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.jmacro.2019.103162" target="_blank" >10.1016/j.jmacro.2019.103162</a>

Result language
angličtina
Original language name
Determinants of fiscal multipliers revisited
Original language description
We generalize a simple New Keynesian model and show that a flattening of the Phillips curve reduces the size of fiscal multipliers at the zero lower bound (ZLB) on the nominal interest rate. The factors behind the flatting are consistent with micro- and macroeconomic empirical evidence: it is a result of, not a higher level of price rigidity, but an increase in the degree of strategic complementarity in price-setting -invoked by the assumption of a specific instead of an economy-wide labour market, and decreasing instead of constant-returns-to-scale. In normal times, the efficacy of fiscal policy and resulting multipliers tends to be small because negative wealth effects crowd out consumption, and because monetary policy endogenously reacts to fiscally-driven increases in inflation and output by raising rates, offsetting part of the stimulus. In times of a binding ZLB and a fixed nominal rate, an increase in (expected) inflation instead lowers the real rate, leading to larger fiscal multipliers. Conditional on being in a ZLB-environment, under a flatter Phillips curve, increases in expected inflation are lower, so that fiscal multipliers at the ZLB tend to be lower. Finally, we also discuss the role of solution methods in determining the size of fiscal multipliers.
Czech name
—
Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
—
OECD FORD branch
50201 - Economic Theory

Project
<a href="/en/project/GA17-14263S" target="_blank" >GA17-14263S: Dynamic forecast averaging of macroeconomic models</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2020
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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