Fiscal Policy in a Financial Crisis: Standard Policy vs. Bank Rescue Measures

Robert Kollmann (), Werner Roeger and Jan in'tVeld
Authors registered in the RePEc Author Service: Jan in 't Veld

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: A key dimension of fiscal policy during the financial crisis was massive government support for the banking system. The macroeconomic effects of that support have, so far, received little attention in the literature. This paper fills this gap, using a quantitative dynamic model with a banking sector. Our results suggest that state aid for banks may have a strong positive effect on real activity. Bank state aid multipliers are in the same range as conventional fiscal spending multipliers. Support for banks has a positive effect on investment, while a rise in government purchases crowds out investment.

Keywords: State support for banks; financial crises; fiscal stimulus; real activity (search for similar items in EconPapers)
JEL-codes: E62 E63 G21 G28 H25 (search for similar items in EconPapers)
Pages: 13 p.
Date: 2012-01
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Related works:
Working Paper: Fiscal Policy in a Financial Crisis: Standard Policy vs. Bank Rescue Measures (2012)
Working Paper: Fiscal Policy in a Financial Crisis: Standard Policy vs. Bank Rescue Measure (2012)
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