Fiscal Policy: Financing and Indebtedness

Jing Cynthia Wu, Shihan Xie, Yinxi Xie and Ji Zhang

No 12321, CESifo Working Paper Series from CESifo

Abstract: We conduct a large-scale information randomized controlled trial to study fiscal policy impacts. Surveying approximately 9,000 households across five eurozone countries with varying debt-to-GDP ratios enables a clean cross-country comparison. The key finding is that the fiscal multiplier depends jointly on the financing method and the country’s debt burden: multipliers are smaller in high-debt countries when debt-financed but remain similar across countries when tax-financed. Finally, we develop a New Keynesian model featuring fiscal discipline, which reproduces the empirical patterns observed in the survey and highlights their underlying economic mechanisms.

Keywords: survey RCT; fiscal multiplier; financing method; debt-to-GDP ratio (search for similar items in EconPapers)
JEL-codes: C83 D84 E62 H60 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12321

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