Unconventional Fiscal Policy At The Zero Bound
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| Author | : Isabel Correia |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2011 |
| Genre | : Economics |
| ISBN | : |
When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as wasteful public spending or future commitments to inflate. We conclude that in the New Keynesian model, the zero bound on nominal interest rates is not a relevant constraint on both fiscal and monetary policy.
| Author | : Payton E. Dawson |
| Publisher | : Nova Science Publishers |
| Total Pages | : 0 |
| Release | : 2013 |
| Genre | : Monetary policy |
| ISBN | : 9781626186378 |
The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to re-evaluate its monetary policy. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfil its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. This book analyses the economic effects of these programs, the current economic context in which these policies have been adopted, policy alternatives that the Fed has not pursued to date and their potential effects, potential legislative options for restricting the Fed's pursuit of unconventional monetary policy, and issues surrounding the eventual "exit strategy" from unconventional policy.
| Author | : Francesco D'Acunto |
| Publisher | : |
| Total Pages | : 5 |
| Release | : 2018 |
| Genre | : Consumption (Economics) |
| ISBN | : |
Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in value-added tax (VAT) and household survey data for Poland. We find households increased their inflation expectations and willingness to purchase durables before the increase in VAT. Future research has to ensure income, wealth effects, or intratemporal substitution channels cannot explain these results and ideally exploit exogenous variation in VAT in a fixed nominal interest rate environment.
| Author | : Ben S. Bernanke |
| Publisher | : www.bnpublishing.com |
| Total Pages | : 0 |
| Release | : 2009-03 |
| Genre | : |
| ISBN | : 9781607961055 |
The success over the years in reducing inflation and, consequently, the average level of nominal interest rates has increased the likelihood that the nominal policy interest rate may become constrained by the zero lower bound. When that happens, a central bank can no longer stimulate aggregate demand by further interest-rate reductions and must rely on "non-standard" policy alternatives. To assess the potential effectiveness of such policies, we analyze the behavior of selected asset prices over short periods surrounding central bank statements or other types of financial or economic news and estimate "noarbitrage" models of the term structure for the United States and Japan. There is some evidence that central bank communications can help to shape public expectations of future policy actions and that asset purchases in large volume by a central bank would be able to affect the price or yield of the targeted asset.
| Author | : International Monetary Fund. Fiscal Affairs Dept. |
| Publisher | : International Monetary Fund |
| Total Pages | : 49 |
| Release | : 2013-04-18 |
| Genre | : Business & Economics |
| ISBN | : 1498341985 |
This paper addresses three questions about unconventional monetary policies. First, what policies were tried, and with what objectives? Second, were policies effective? And third, what role might these policies continue to play in the future?
| Author | : Hannah Seidl |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2021 |
| Genre | : |
| ISBN | : |
We show that in a New Keynesian model with household heterogeneity, fiscal policy can be a perfect substitute for monetary policy: three simple conditions for consumption taxes, labor taxes, and the government debt level are sufficient to induce the same consumption and labor supply of each household and, thus, the same allocation as interest rate policies. When monetary policy is constrained by a binding lower bound, a currency union, or an exchange rate peg, fiscal policy can therefore replicate any allocation that hypothetically unconstrained monetary policy would generate.
| Author | : Christian Bredemeier |
| Publisher | : |
| Total Pages | : 42 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
This paper questions unconventional fiscal policy effects when the monetary policy rate is at the zero lower bound. We provide evidence for the US that the spread between the policy rate and the US-LIBOR, which is more relevant for private sector transactions, increases with government expenditures. We introduce a corresponding spread into an otherwise standard macroeconomic model which reproduces this observation. The model predicts that the fiscal multiplier takes conventional values, regardless of whether the policy rate follows a standard feedback rule or is at its zero lower bound. Likewise, labor tax increases exert contractionary effects in both cases.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 33 |
| Release | : 1998-03-01 |
| Genre | : Business & Economics |
| ISBN | : 1451844239 |
Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
| Author | : Mr.Tamim Bayoumi |
| Publisher | : International Monetary Fund |
| Total Pages | : 49 |
| Release | : 2014-04-04 |
| Genre | : Business & Economics |
| ISBN | : 1475561784 |
The proposed SDN would take stock of the current debate on the shape that monetary policy should take after the crisis. It revisits the pros and cons of expanding the objectives of monetary policy, the merits of turning unconventional policies into conventional ones, how to make monetary policy frameworks more resilient to the risk of being constrained by the zero-lower bound going forward, and the institutional challenges to preserve central bank independence with regards to monetary policy, while allowing adequate government oversight over central banks’ new responsibilities. It will draw policy conclusions where consensus has been reached, and highlight the areas where more work is needed to get more granular policy advice.
| Author | : Tullio Jappelli |
| Publisher | : Oxford University Press |
| Total Pages | : 313 |
| Release | : 2017 |
| Genre | : Business & Economics |
| ISBN | : 0199383154 |
In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence.
