The Government Spending Multiplier in a (Mis-)Managed Liquidity Trap

Jordan Roulleau-Pasdeloup

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: I study the impact of a government spending shock in a New Keynesian model when monetary policy is set optimally. In this framework, the economy is at the Zero Lower Bound but expectations are well managed by the Central Bank. As such, the multiplier effect of government spending increases on expected inflation is small while the one on output can be larger than one. This is consistent with recent empirical evidence on the effects of the 2009 ARRA.

Keywords: Zero lower bound; New Keynesian; Government spending multiplier (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 E62 (search for similar items in EconPapers)
Pages: 26 pp.
Date: 2016-03
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Journal Article: The Government Spending Multiplier in a (Mis)Managed Liquidity Trap (2018)
Working Paper: The Government Spending Multiplier in a (Mis-)Managed Liquidity Trap (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:16.03

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