Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45806 
Year of Publication: 
2011
Series/Report no.: 
ZEW Discussion Papers No. 11-037
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (Smets and Wouters, 2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound and the capital. The stimulus results in negative welfare effects for unconstrained agents. The constrained agents gain, if they discount the future substantially.
Subjects: 
Fiscal Stimulus
New Keynesian model
liquidity trap
zero lower bound
fiscal multiplier
JEL: 
E62
E63
E65
H20
H62
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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