Fiscal Policy, Public Debt and the World Crisis

Gauti Eggertsson

German Economic Review, 2014, vol. 15, issue 2, 225-242

Abstract: This study summarizes a theory of the origin of the current world economic crisis and the role of fiscal policy in mitigating its effect. The perspective is dynamic stochastic general equilibrium analysis. Overall, the model analysis suggests a strong case for fiscal policy if the monetary authority is unable/unwilling to close the output gap. This remains the case, even when explicitly taking into account public debt dynamics.

Keywords: Fiscal policy; liquidity trap; deficits (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1111/geer.12037

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