The Effects of a Money-Financed Fiscal Stimulus

Galí, Jordi
Authors registered in the RePEc Author Service: Jordi Galí

No 10165, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I analyze the effects of an increase in government purchases financed entirely through seignorage, in both a classical and a New Keynesian framework, and compare them with those resulting from a more conventional debt-financed stimulus. My findings point to the importance of nominal rigidities in shaping those effects. Under a realistic calibration of such rigidities, a money-financed fiscal stimulus is shown to have very strong effects on economic activity, with relatively mild inflationary consequences. If the steady state is sufficiently inefficient, an increase in government purchases may increase welfare even if such spending is wasteful.

Keywords: Fiscal multiplier; Government spending; Seignorage (search for similar items in EconPapers)
JEL-codes: E32 E52 E62 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (13)

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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 (2015)
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