Articlegreen2011

When Is the Government Spending Multiplier Large?

Lawrence J. Christiano · Martin Eichenbaum · Sergio Tavares Rebelo

1,839 citations0/0 files storedJournal of Political Economy

No readable copy stored yet — this record is metadata only.

Monetary Policy and Economic Impact Economic theories and models Fiscal Policy and Economic Growth

Abstract

We argue that the government-spending multiplier can be much larger than one when the zero lower bound on the nominal interest rate binds. The larger is the fraction of government spending that occurs while the nominal interest rate is zero, the larger is the value of the multiplier. After providing intuition for these results, we investigate the size of the multiplier in a dynamic, stochastic, general equilibrium model. In this model the multiplier e�ect is substantially larger than one when the zero bound binds. Our model is consistent with the behavior of key macro aggregates during the recent financial crisis. We thank the editor, Monika Piazzesi, Rob Shimer, and two anonymous referees for their

Citations in this library

Stored only when both papers are in the corpus — 1,839 citations exist upstream.

References

1936The General Theory of Employment, Interest and Money.1936The General Theory of Employment, Interest and Money.1936The General Theory of Employment, Interest and Money, by John Maynard Keynes 2005Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy 1937The General Theory of Employment 2007Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach 1998The Financial Accelerator in a Quantitative Business Cycle Framework 1996Staggered Prices in a Utility-Maximizing Framework

Cited by

2012Measuring the Output Responses to Fiscal Policy 2011Identifying Government Spending Shocks: It's all in the Timing*2017Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data 2013Growth Forecast Errors and Fiscal Multipliers 2012Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach*2010How Big (Small?) are Fiscal Multipliers?

Imported from OpenAlex (CC0) — nothing here is generated.