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http://hdl.handle.net/10419/64819
  

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dc.contributor.authorKirchner, Markusen_US
dc.contributor.authorvan Wijnbergen, Swederen_US
dc.date.accessioned2012-10-04en_US
dc.date.accessioned2012-10-11T12:59:46Z-
dc.date.available2012-10-11T12:59:46Z-
dc.date.issued2012en_US
dc.identifier.isbn978-3-86558-834-0en_US
dc.identifier.urihttp://hdl.handle.net/10419/64819-
dc.description.abstractRecent macro developments in the euro area have highlighted the interactions between fiscal policy, sovereign debt, and financial fragility. We take a structural macroeconomic model with frictions in the financial intermediation process, in line with recent research, but introduce asset choice and sovereign debt holdings in the portfolio of banks. Using this model, we emphasize a new crowding-out mechanism that works through reduced private access to credit when banks accumulate sovereign debt under a leverage constraint. Our results show that, when banks invest a substantial fraction of their assets in sovereign debt, the effectiveness of fiscal stimulus policies may be impaired because deficit-financed fiscal expansions may tighten financial conditions to such an extent that private demand is crowded out. We also analyze the macroeconomic effectiveness of liquidity support to commercial banks through recapitalizations or loans by the government and the impact of different ways of financing those policies.en_US
dc.language.isoengen_US
dc.publisherDt. Bundesbank Frankfurt, M.en_US
dc.relation.ispartofseriesDiscussion Paper, Deutsche Bundesbank 20/2012en_US
dc.subject.jelE44en_US
dc.subject.jelE62en_US
dc.subject.jelH30en_US
dc.subject.ddc330en_US
dc.subject.keywordfinancial intermediationen_US
dc.subject.keywordfiscal policyen_US
dc.subject.keywordsovereign debten_US
dc.titleFiscal deficits, financial fragility, and the effectiveness of government policiesen_US
dc.typeWorking Paperen_US
dc.identifier.ppn726784702en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:bubdps:202012-
Appears in Collections:Discussion Papers, Deutsche Bundesbank

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