 The effects of fiscal stimulus under monetary accommodationHanhui Tian, Chenxi Wang and Chengsi Zhang Journal of Macroeconomics, 2025, vol. 85, issue C Abstract: This paper investigates the transmission of fiscal stimulus under monetary accommodation (MA) in a New Keynesian framework. Our analysis highlights the financial accelerator channel, through which changes in nominal interest rate affect the asset price and consequently the real financing cost of firms. We examine how financial frictions and nominal interest rate dynamics shape the macroeconomic effects of fiscal expansion and compare different MA strategies: accommodative commitment policy and pegged interest rate policy, which capture worldwide practices of MA. Our findings highlight that the effectiveness of MA depends on the duration of fiscal stimulus and the presence of frictional financial intermediation. Additionally, we show that imperfect risk sharing between households and entrepreneurs further enhances the role of financial accelerator channel. Keywords: Fiscal stimulus; Monetary accommodation; Financial accelerator channel; Fiscal multipliers; Imperfect risk sharing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:85:y:2025:i:c:s016407042500028x DOI: 10.1016/j.jmacro.2025.103691 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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