Do Fiscal Multipliers Vary with Different Character of Monetary-Fiscal Interactions?

Michal Bencik

No WP 11/2017, Working and Discussion Papers from Research Department, National Bank of Slovakia

Abstract: We investigate the fiscal multiplier in normal times and in the presence of a binding zero lower bound on interest rates with SVARs. We construct special shocks to interest rates that compensate their reactions to fiscal expansion and hold them constant and apply it to the Euro area and the United States. We find that for the former, the multiplier increases sharply in the ZLB, but it decreases in the ZLB for the latter. The sign of its change is determined by the coordination of fiscal and monetary policy i.e. whether the interest rates rise or drop in response to fiscal expansion. We applied this method to Slovak Republic as well and found that the change of the multiplier in ZLB in Slovak Republic is analogous to that in the Euro area.

Keywords: monetary-fiscal interactions; fiscal multipliers; zero lower bound; VAR models; compensating shocks (search for similar items in EconPapers)
JEL-codes: C32 E62 E63 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2017-12
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nbs.sk/_img/Documents/PUBLIK/WP_11_201 ... l_Multipliers_EN.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:svk:wpaper:1052

Access Statistics for this paper

More papers in Working and Discussion Papers from Research Department, National Bank of Slovakia Contact information at EDIRC.
Bibliographic data for series maintained by ().