Debt Consolidation and Fiscal Stabilization of Deep Recessions

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dc.contributor.author CORSETTI, Giancarlo
dc.contributor.author KUESTER, Keith
dc.contributor.author MEIER, André
dc.contributor.author MÜLLER, Gernot J.
dc.date.accessioned 2010-02-09T16:14:27Z
dc.date.available 2010-02-09T16:14:27Z
dc.date.issued 2010
dc.identifier.issn 1725-6704
dc.identifier.uri http://hdl.handle.net/1814/13223
dc.description.abstract The global financial crisis of 2008–09 has sent public debt on sharply higher trajectories. With the economic recovery gradually taking hold, the focus is now shifting to fiscal “exit” strategies. Medium-term consolidation efforts are likely to include not only tax increases but also sizeable spending cuts. Our paper uses a standard new Keynesian model to show that the anticipation of such medium-term spending cuts generally enhances the expansionary effect of short-run fiscal stimulus. This conclusion still applies when monetary policy is constrained by the zero lower bound on policy rates. In this case, however, the reversal of government spending must not occur too early on the recovery path, or at least must be suitably gradual. en
dc.language.iso en en
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2010/03 en
dc.subject Fiscal policy en
dc.subject fiscal stabilization en
dc.subject fiscal multiplier en
dc.subject exit strategy en
dc.subject consolidation en
dc.subject monetary policy en
dc.subject zero lower bound en
dc.subject E63 en
dc.subject E62 en
dc.subject E52 en
dc.title Debt Consolidation and Fiscal Stabilization of Deep Recessions en
dc.type Working Paper en
dc.neeo.contributor MEIER|André|aut|
dc.neeo.contributor MÜLLER|Gernot J.|aut|
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