The effects of a money-financed fiscal stimulus

Jordi Galí

Journal of Monetary Economics, 2020, vol. 115, issue C, 1-19

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 multipliers; Helicopter drop (search for similar items in EconPapers)
JEL-codes: E32 E52 E62 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (36)

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Related works:
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:eee:moneco:v:115:y:2020:i:c:p:1-19

DOI: 10.1016/j.jmoneco.2019.08.002

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