By the same authors

From the same journal

Why are fiscal multipliers asymmetric? The role of credit constraints

Research output: Contribution to journalArticle

Published copy (DOI)

Author(s)

Department/unit(s)

Publication details

JournalEconomica
DateAccepted/In press - 11 Jan 2019
DateE-pub ahead of print (current) - 1 Apr 2020
Early online date1/04/20
Original languageEnglish

Abstract

Recent empirical evidence strongly points to the state-dependence of fiscal multipliers which are larger in recessions than in expansions. Yet, standard business cycle models face great difficulty in producing such asymmetric fiscal policy effects. By incorporating endogenously binding collateral constraints into a medium scale DSGE model, we find that fiscal effectiveness can vary substantially across the business cycle. The key to our framework is the state-dependent nature of collateral constraints; binding in bad times while slack in good times, amplifying the effectiveness of fiscal policy and hence generating fiscal multipliers that are larger during recessions.

Bibliographical note

This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. Further copying may not be permitted; contact the publisher for details.

Discover related content

Find related publications, people, projects, datasets and more using interactive charts.

View graph of relations