Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302860 
Year of Publication: 
2024
Series/Report no.: 
KOF Working Papers No. 520
Publisher: 
ETH Zurich, KOF Swiss Economic Institute, Zurich
Abstract: 
This paper leverages a novel survey among German senior government officials to investigate fiscal responses to monetary policy shocks. Using randomized vignette treatments, we present officials with scenarios of increased government interest costs and analyze their expected fiscal adjustments. Our findings reveal that officials predominantly adjust fiscal policy by increasing debt and reducing spending, with tax increases being the least favored option. Moreover, they prefer adjusting multiple fiscal instruments simultaneously rather than changing a single instrument. In a back-of-the-envelope calculation, we compute the macroeconomic impact of a monetary policy shock under a mixed fiscal policy adjustment.
Subjects: 
Fiscal policy
monetary policy
fiscal-monetary interaction
expectation formation
survey experiment
JEL: 
D83
E62
E63
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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