Paper #1441

Títol:

The effects of a money-financed fiscal stimulus

Autor:

Jordi Galí

Data:

Setembre 2014

Resum:

I analyze the effects of a money-financed fiscal stimulus and compare them with those resulting from a conventional debt-financed stimulus. I study the effects of both a tax cut and an increase in government purchases, with and without a binding zero lower bound (ZLB) on the nominal interest rate. When the ZLB is not binding, a money-financed fiscal stimulus is shown to have much larger multipliers than a debt-financed fiscal stimulus. That difference in effectiveness persists, but is much smaller, under a binding ZLB. Nominal rigidities are shown to play a major role in shaping those effects.

Paraules clau:

seignorage, government spending, fiscal multiplier, helicopter drop.

Codis JEL:

E32, E52, E62

Àrea de Recerca:

Macroeconomia i Economia Internacional

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