Effects of Fiscal Policy on Credit Markets

Alan Auerbach, Yuriy Gorodnichenko and Daniel Murphy ()

No 26655, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Credit markets typically freeze in recessions: access to credit declines and the cost of credit increases. A conventional policy response is to rely on monetary tools to saturate financial markets with liquidity. Given limited space for monetary policy in the current economic conditions, we study how fiscal stimulus can influence local credit markets. Using rich geographical variation in U.S. federal government contracts, we document that, in a local economy, interest rates on consumer loans decrease in response to an expansionary government spending shock.

JEL-codes: E32 E43 E62 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-ban and nep-mac
Note: EFG ME PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Alan J. Auerbach & Yuriy Gorodnichenko & Daniel Murphy, 2020. "Effects of Fiscal Policy on Credit Markets," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 119-124, May.

Downloads: (external link)
http://www.nber.org/papers/w26655.pdf (application/pdf)

Related works:
Journal Article: Effects of Fiscal Policy on Credit Markets (2020)
Working Paper: Effects of Fiscal Policy on Credit Markets (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26655

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26655

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().