Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207754 
Year of Publication: 
2019
Series/Report no.: 
NBB Working Paper No. 374
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
I examine the effect of fiscal policy at the zero lower bound if households have preferences over safe assets (POSA) calibrated consistent with evidence on household savings behavior and individual discount rates, and empirical estimates of the effect of the supply of US government debt on government bond yields. POSA attenuate the effect of changes in the household's permanentincome on her consumption today and implies a wealth effect from government bonds. It therefore strongly increases the multiplier of a permanent expenditure change, moving it much closer to the multiplier of temporary expenditure changes. The result becomes even stronger with credit constrained households and firms.
Subjects: 
Fiscal multiplier of temporary and persistent expenditure changes
zero lower bound
wealth in the utility function
JEL: 
E52
E62
E32
Document Type: 
Working Paper

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