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Fiscal stimulus and distortionary taxation

Thorsten Drautzburg and Harald Uhlig ()

No 13-46, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital, and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.53 and modestly negative long-run multipliers around -0.36. We explain the central empirical findings with the help of a simple three equation New Keynesian model with sticky wages and credit-constrained households.

Keywords: Keynesian; economics (search for similar items in EconPapers)
Date: 2013, Revised 2013
New Economics Papers: this item is included in nep-mac and nep-pbe
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Related works:
Journal Article: Fiscal Stimulus and Distortionary Taxation (2015) Downloads
Working Paper: Fiscal stimulus and distortionary taxation (2011) Downloads
Working Paper: Fiscal Stimulus and Distortionary Taxation (2011) Downloads
Working Paper: Fiscal Stimulus and Distortionary Taxation (2011) Downloads
Working Paper: Fiscal stimulus and distortionary taxation (2011) Downloads
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