Fiscal Stimulus and the Systematic Response of Monetary Policy

Christian Wolf

AEA Papers and Proceedings, 2023, vol. 113, 388-93

Abstract: Economic theory suggests that the effects of fiscal stimulus can vary substantially with the systematic response of monetary policy. Empirical estimates of the causal effects of fiscal shocks implicitly embed a particular monetary reaction: they provide treatment effects that average across in-sample monetary policy. Building on McKay and Wolf (2022), I discuss how evidence on monetary policy shocks can be used to predict the effects of fiscal stimulus under arbitrary monetary policy reaction. I review the underlying theory, propose a simple empirical strategy, and present an application.

JEL-codes: E23 E31 E43 E52 E62 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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DOI: 10.1257/pandp.20231072

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