Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154452
Authors: 
Bletzinger, Tilman
Lalik, Magdalena
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 2019
Abstract: 
This paper uses two established DSGE models (QUEST III and Smets-Wouters) to assess the impact of fiscal spending cuts on output and, in particular, also on inflation in the euro area under alternative settings for monetary policy. We compare four different settings of constrained monetary policy, taking into account alternative agents’ expectations about future monetary policy. We illustrate that those expectations are even more important for the size of the fiscal multipliers than the difference between exogenously versus endogenously modelled constraints. We confirm the well-known finding that fiscal multipliers exhibit an over-proportional reaction when monetary policy is constrained. The novelty of our results is that this over-proportionality is stronger for the fiscal multiplier on inflation than on output. We relate this finding to the structural parameters of the models by means of a Global Sensitivity Analysis.
Subjects: 
constrained monetary policy
fiscal multipliers
zero lower bound
JEL: 
E31
E43
E52
E62
E63
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2741-3
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.