The effect of fiscal policy and forward guidance with preferences over wealth
Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking from Verein für Socialpolitik / German Economic Association
I examine how the effects of fiscal policy and forward guidance are shaped by preferences over wealth calibrated based on microeconomic evidence on household saving behavior and individual discount rates. The contractionary effect of a permanent cut in government expenditure implemented during a period when monetary policy is constrained becomes larger due to smaller consumption crowding. Furthermore, the assumption much reduces the effect of forward guidance on the future policy interest rate.
JEL-codes: E52 E62 E32 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc17:168070
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