Optimal monetary and fiscal policy with a zero bound on nominal interest rates

I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal inte
I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy, accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated with the presence of the zero bound. Under commitment, the gains associated with the use of the fiscal policy tool remain modest, even though fiscal stabilization policy is part of the optimal policy mix.
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Metadaten
Author:Sebastian Schmidt
URN:urn:nbn:de:hebis:30:3-253365
Parent Title (German):Working paper series / Institute for Monetary and Financial Stability ; 53
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (53)
Document Type:Working Paper
Language:English
Date of Publication (online):2012/07/06
Year of first Publication:2012
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2012/07/19
Tag:Commitment; Discretion; Fiscal policy; Monetary policy; New Keynesian model; Zero nominal interest rate bound
Institutes: Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E31 Price Level; Inflation; Deflation
E52 Monetary Policy
E62 Fiscal Policy
E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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