Fiscal Stimulus and Distortionary Taxation

Thorsten Drautzburg and Harald Uhlig ()

No 17111, NBER Working Papers from National Bureau of Economic Research, Inc

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 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound and the capital. The stimulus results in negative welfare effects for unconstrained agents. The constrained agents gain, if they discount the future substantially.

JEL-codes: E62 E63 E65 H20 H62 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (79)

Published as Thorsten Drautzburg & Harald Uhlig, 2015. "Fiscal Stimulus and Distortionary Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 894-920, October.

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Related works:
Journal Article: Fiscal Stimulus and Distortionary Taxation (2015)
Working Paper: Fiscal stimulus and distortionary taxation (2013)
Working Paper: Fiscal stimulus and distortionary taxation (2011)
Working Paper: Fiscal Stimulus and Distortionary Taxation (2011)
Working Paper: Fiscal stimulus and distortionary taxation (2011)
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