Fiscal policy in the EU in the crisis: a model-based approach

István Székely, Werner Roeger and Jan in 't Veld

No 423, CASE Network Studies and Analyses from CASE-Center for Social and Economic Research

Abstract: This paper uses a multi region DSGE model with collateral constrained households and residential investment to examine the effectiveness of fiscal policy stimulus measures in a credit crisis. The paper explores alternative scenarios which differ by the type of budgetary measure, its length, the degree of monetary accommodation and the level of international coordination. In particular we provide estimates for New EU Member States where we take into account two aspects. First, debt denomination in foreign currency and second, higher nominal interest rates, which makes it less likely that the Central Bank is restricted by the zero bound and will consequently not accommodate a fiscal stimulus. We also compare our results to other recent results obtained in the literature on fiscal policy which generally do not consider credit constrained households.

Keywords: Fiscal Policy; Monetary Policy; Fiscal Multiplier; Collateral Constraint; DSGE modelling (search for similar items in EconPapers)
JEL-codes: E21 E62 F42 H31 H63 (search for similar items in EconPapers)
Pages: 28 Pages
Date: 2011-03
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sec:cnstan:0423

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