The Effects of a Money-Financed Fiscal Stimulus
Jordi GalÃ
Authors registered in the RePEc Author Service: Jordi Galí
No 786, Working Papers from Barcelona School of Economics
Abstract:
I analyze the effects of a fiscal stimulus financed through money creation. I study the effects of both a tax cut and an increase in government purchases, and compare them with those resulting from a conventional debt-financed stimulus, with and without a binding zero lower bound on the nominal interest rate. When the ZLB is not binding, a money-financed fiscal stimulus is shown to have much larger multipliers than a debt-financed fiscal stimulus. That difference in effectiveness persists, but is much smaller, under a binding ZLB. The analysis points to the key role of nominal rigidities in shaping those effects.
Keywords: government spending; seignorage; fiscal multipliers; helicopter drop (search for similar items in EconPapers)
JEL-codes: E32 E52 E62 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-mac and nep-pbe
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Citations: View citations in EconPapers (12)
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Related works:
Journal Article: The effects of a money-financed fiscal stimulus (2020) 
Working Paper: The Effects of a Money-Financed Fiscal Stimulus (2019) 
Working Paper: The effects of a money-financed fiscal stimulus (2019) 
Working Paper: The Effects of a Money-Financed Fiscal Stimulus (2014) 
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:786
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