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Autor:innen: 
Erscheinungsjahr: 
2025
Schriftenreihe/Nr.: 
ECB Working Paper No. 3106
Verlag: 
European Central Bank (ECB), Frankfurt a. M.
Zusammenfassung: 
This paper investigates the relationship between public debt and the effectiveness of fiscal policy, presenting evidence of an inverse relationship between government debt and fiscal multipliers. To explain the results, I develop and calibrate a HANK model tailored to the U.S. economy. The model reveals that higher public debt diminishes fiscal multipliers by making households less constrained. Theoretically, I show intertemporal marginal propensities to consume (iMPCs) are sufficient statistics of public debt, influencing fiscal multipliers. Decomposing changes in iMPCs into components driven by wealth distribution and the policy function, I find that the primary factor driving variations in iMPCs is the change in interest rates due to the variation of government bonds. This highlights a novel mechanism: even in the absence of fiscal limits or crowding out, large stocks of debt can weaken fiscal stimulus through their effect on household behavior.
Schlagwörter: 
Fiscal multipliers
Government bonds
Consumption heterogeneity
Interest rates
Wealth effects
JEL: 
E21
E62
E43
D31
D52
Persistent Identifier der Erstveröffentlichung: 
ISBN: 
978-92-899-7429-5
Dokumentart: 
Working Paper

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