The role of fiscal policy -- a survey of recent empirical findings

Vo Phuong Mai Le, David Meenagh and A. Patrick Minford

No E2023/26, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: DSGE models based on New Keynesian principles, which have been extended to allow for banking, the zero lower bound on interest rates (ZLB), and varying price duration, can account well for recent macroeconomic behavior across a variety of economies. These models Önd that active Öscal policy can contribute to macroeconomic stability and welfare by reducing the frequency of hitting the ZLB. Fiscal policy can also share the stabilisation role with monetary policy, whose e§ectiveness under the ZLB is much reduced.

Keywords: Moments; fiscal policy; zero bound; monetary policy; DSGE model; macro stability; indirect inference (search for similar items in EconPapers)
JEL-codes: E17 E31 E32 E42 E52 E62 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2023-10
New Economics Papers: this item is included in nep-dge and nep-mac
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