Unconventional Fiscal Policy at the Zero Bound
AbstractWhen 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 low interest rates.
CitationCorreia, Isabel, Emmanuel Farhi, Juan Pablo Nicolini, and Pedro Teles. 2013. "Unconventional Fiscal Policy at the Zero Bound." American Economic Review, 103 (4): 1172-1211. DOI: 10.1257/aer.103.4.1172
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E62 Fiscal Policy
- H20 Taxation, Subsidies, and Revenue: General