Determinants of fiscal multipliers revisited

Kód výsledku v 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>

Nalezeny alternativní kódy

RIV/00216224:14560/20:00114004

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

Determinants of fiscal multipliers revisited

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

Determinants of fiscal multipliers revisited

Popis výsledku anglicky

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.

Druh

J_imp - Článek v periodiku v databázi Web of Science

CEP obor

—

OECD FORD obor

50201 - Economic Theory

Projekt

<a href="/cs/project/GA17-14263S" target="_blank" >GA17-14263S: Dynamické průměrování předpovědí makroekonomických modelů</a><br>

Návaznosti

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Rok uplatnění

2020

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název periodika

Journal of Macroeconomics

ISSN

0164-0704

e-ISSN

—

Svazek periodika

63

Číslo periodika v rámci svazku

March

Stát vydavatele periodika

US - Spojené státy americké

Počet stran výsledku

24

Strana od-do

1-24

Kód UT WoS článku

000528047300001

EID výsledku v databázi Scopus

2-s2.0-85074477412