Fiscal rules and unemployment
Britta Gehrke ()
No 10/2014, FAU Discussion Papers in Economics from Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics
This paper shows how fiscal policy affects unemployment in a New Keynesian model with search and matching frictions and distortionary taxation. The model is estimated using US data that includes labor market flows and distinct fiscal instruments. Several findings stand out. First, unemployment mult ipliers for spending and consumption tax cuts are substantial, even though output multipliers turn out to be less than one. Second, multipliers for labor tax cuts ar e small. Third, fiscal rules enhance the positive effects of discretionary fiscal policy. However, these expansionary effects on the multipliers are modest compare d to earlier studies.
Keywords: Fiscal policy; Fiscal rules; Unemployment; Search and matching (search for similar items in EconPapers)
JEL-codes: E62 J20 C11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
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Journal Article: FISCAL RULES AND UNEMPLOYMENT (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwqwdp:102014
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