Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70655
Authors: 
Braun, R. Anton
Körber, Lena Mareen
Waki, Yuichiro
Year of Publication: 
2012
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2012-5a
Abstract: 
Does fiscal policy have qualitatively different effects on the economy in a liquidity trap? We analyze a nonlinear stochastic New Keynesian model and compare the true and loglinearized equilibria. Using the loglinearized equilibrium conditions, the answer to the above question is yes. However, for the true nonlinear model, the answer is no. For a broad range of empirically relevant parameterizations, labor falls in response to a tax cut in the loglinearized economy but rises in the true economy. While the government purchase multiplier is above two in the loglinearized economy it is about one in the true economy.
Subjects: 
monetary policy
fiscal policy
zero bound
JEL: 
H30
E12
E62
E50
Document Type: 
Working Paper

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