Fiscal Multipliers in the Liquidity Trap: International Theory and Evidence

Johannes Wieland
Additional contact information
Johannes Wieland: University of California, Berkeley

No 717, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: In a small open economy New Keynesian model without capital, the size of the fiscal multiplier is above 1, if and only if the terms of trade deteriorate in response to a fiscal expansion. I test whether the terms of trade exhibit this deterioration in the liquidity trap and find that the data reject this hypothesis. While the fiscal multiplier in the liquidity trap must be less than 1 in the baseline model, within a large open economy with capital, the estimated terms of trade response is consistent with a fiscal multiplier up to 1.26 in the liquidity trap.

Date: 2010
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:red:sed010:717

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().