The effects of a money-financed fiscal stimulus

Jordi Galí

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: I analyze the effects of a money-financed fiscal stimulus and compare them with those resulting from a conventional debt-financed stimulus. I study the effects of both a tax cut and an increase in government purchases, with and without a binding zero lower bound (ZLB) 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. Nominal rigidities are shown to play a major role in shaping those effects.

Keywords: seignorage; government spending; fiscal multiplier; helicopter drop. (search for similar items in EconPapers)
JEL-codes: E32 E52 E62 (search for similar items in EconPapers)
Date: 2014-09, Revised 2019-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
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)
Working Paper: The Effects of a Money-Financed Fiscal Stimulus (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1441

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