Fiscal Policy Multipliers in the EU During the Credit Crisis: A DSGE Analysis

28 Pages Posted: 15 Jan 2012

See all articles by Werner Roeger

Werner Roeger

European Commission, DGECFIN; European Commission

Jan in 't Veld

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Date Written: March 25, 2010

Abstract

This paper uses a multi region DSGE model with collateral constrained households and residential investment to examine the effectiveness of fiscal policy stimulus measures in a credit crisis. The paper explores alternative scenarios which differ by the type of budgetary measure, its length, the degree of monetary accommodation and the level of international coordination. It is found that an increase in households facing credit constraints and the fact that the zero lower bound on nominal interest rates has become binding both increase the effectiveness of temporary fiscal stimulus measures.

Suggested Citation

Roeger, Werner and Roeger, Werner and in 't Veld, Jan, Fiscal Policy Multipliers in the EU During the Credit Crisis: A DSGE Analysis (March 25, 2010). Bank of Italy Occasional Paper, Available at SSRN: https://ssrn.com/abstract=1985199 or http://dx.doi.org/10.2139/ssrn.1985199

Werner Roeger (Contact Author)

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

European Commission ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

Jan In 't Veld

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

CHAR 14/245
Brussels, Bruxelles B-1049
Belgium
(32 2) 2993 577 (Phone)
(32 2) 2957 499 (Fax)

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