Fiscal Multipliers and Financial Crises

Miguel Faria-e-Castro

No 2018-023, Working Papers from Federal Reserve Bank of St. Louis

Abstract: I study the effects of the US fiscal policy response to the Great Recession, accounting both for standard tools and financial sector interventions. A nonlinear model calibrated to the US allows me to study the state-dependent effects of different fiscal policies. I combine the model with data on the fiscal policy response to find that the fall in consumption would have been one-third larger in the absence of that response, for a cumulative loss of 7.18%. Transfers and bank recapitalizations yielded the largest fiscal multipliers through new transmission channels that arise from linkages between household and bank balance sheets.

Keywords: fiscal multipliers; financial crises; bailouts; nonlinear methods (search for similar items in EconPapers)
JEL-codes: E4 E6 G01 G28 (search for similar items in EconPapers)
Pages: 83 pages
Date: 2018-10-01, Revised 2022-01
New Economics Papers: this item is included in nep-dge and nep-mac
Note: Publisher DOI: https://doi.org/10.1162/rest_a_01163
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Citations: View citations in EconPapers (11)

Published in The Review of Economics and Statistics

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Related works:
Journal Article: Fiscal Multipliers and Financial Crises (2024)
Working Paper: Fiscal Multipliers and Financial Crises (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2018-023

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DOI: 10.20955/wp.2018.023

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