IS THERE A FISCAL FREE LUNCH IN A LIQUIDITY TRAP?

• 成果类型: Article
• 署名作者: Erceg, Christopher; Linde, Jesper
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1111/jeea.12059
• 发表日期: 2014
• 页码: 73-107
• 关键词: nominal rigidities; GOVERNMENT; shocks; frictions; POLICY; MODEL; US

摘要

In this paper, we use a dynamic stochastic general equilibrium model to examine the effects of an expansion in government spending in a liquidity trap. If the liquidity trap is very prolonged, the spending multiplier can be much larger than in normal circumstances, and the budgetary costs minimal. However, given this fiscal free lunch, it is unclear why policymakers would want to limit the size of fiscal expansion. Our paper addresses this question in a model environment in which the duration of the liquidity trap is determined endogenously, and depends on the size of the fiscal stimulus. We show that even if the multiplier is high for small increases in government spending, it may decrease substantially at higher spending levels; thus, it is crucial to distinguish between the marginal and average responses of output and government debt.