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We document that the United States and other G7 economies have been characterized by an increasingly negative business-cycle asymmetry over the last three decades. This finding can be explained by the concurrent increase in the financial leverage of households and firms. To support this view, we devise and estimate a dynamic general equilibrium model with collateralized borrowing and occasionally binding credit constraints. Improved access to credit increases the likelihood that financial constraints become nonbinding in the face of expansionary shocks, allowing agents to freely substitute inter-temporally. Contractionary shocks, however, are further amplified by drops in collateral values, since constraints remain binding. As a result, booms become progressively smoother and more prolonged than busts. Finally, in line with recent empirical evidence, financially driven expansions lead to deeper contractions, as compared with equally sized nonfinancial expansions. (JEL D14, E23, E32, E44)
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Working Papers of Danmarks Nationalbank describe research and development, often still ongoing, as a contribution to the professional debate. Terms of use: Documents inThe viewpoints and conclusions stated are the responsibility of the individual contributors, and do not necessarily reflect the views of Danmarks Nationalbank.As a general rule, Working Papers are not translated, but are available in the original language used by the contributor.Danmarks Nationalbank's Working Papers are published in PDF format at www.nationalbanken.dk. A free electronic subscription is also available at this Web site.The subscriber receives an e-mail notification whenever a new Working Paper is published. Det er tilladt at kopiere fra Nationalbankens Working Papers -såvel elektronisk som i papirform -forudsat, at Danmarks Nationalbank udtrykkeligt anføres som kilde. Det er ikke tilladt at aendre eller forvanske indholdet. ISSN (trykt/print) 1602-1185 ISSN (online) 1602-1193Resumé I kølvandet på den finansielle krise er der opstået fornyet fokus på potentielle asymmetrier i forholdet mellem aktiemarkedet og pengepolitikken, og på de mulige problemer disse kan medføre. Nyere empiriske studier tyder på, at den amerikanske centralbank netop førte en asymmetrisk rentepolitik overfor aktiemarkedet i perioden op til krisen. I denne artikel undersøges effekterne af en sådan asymmetrisk politik i en dynamisk, stokastisk, generel ligevaegtsmodel (DSGE-model). Den asymmetriske politik medfører en vigtig ikke-linearitet i modellen: Højkonjunkturer vil blive forstaerket, mens recessioner vil blive daempet som følge af politikken. Det undersøges endvidere, i hvilket omfang en asymmetrisk pengepolitik kan ses som en centralbanks forsøg på at udligne eller korrigere for allerede eksisterende asymmetrier i den måde, hvorpå aktiepriser påvirker makroøkonomien. JEL classi…cation: E13, E32, E44, E52, E58. Asymmetric Monetary PolicyThe author wishes to thank Henrik Jensen for competent and inspiring guidance, and Niels Blomquist, Martin Ellison, Adalheidur Gudlaugsdottir, Antonio Mele, Tommaso Monacelli, Gert Peersman, Jesper Rangvid, Emiliano Santoro, and Morten Spange for useful comments and discussions. Also thanks to seminar participants at the University of Oxford, Danmarks Nationalbank. All remaining errors are my own. The views expressed are those of the author, and do not necessarily correspond to those of Danmarks Nationalbank.
We study the empirical effects of fiscal policy in Denmark since the adoption of a fixed exchange rate policy in 1982. Denmark's fixed exchange rate implies that the nominal interest rate remains fixed after a fiscal expansion, facilitating a substantial impact of the fiscal stimulus on the real economy. On the other hand, the large degree of openness of the Danish economy means that a sizeable share of the fiscal stimulus will be directed towards imported goods. Our results suggest that the 'monetary accomodation channel' dominates the 'leakage effect' in the short run. We demonstrate that fiscal stimulus has a rather large impact on economic activity in the very short run, with a government spending multiplier of 1.1 on impact in our preferred specification. We also find that the effects of fiscal stimulus are rather shortlived in Denmark, with the effect on output becoming insignificant after around two years. The fiscal multiplier is above 1 only in the first quarter, and drops to 0.6 one year after the shock. We also find that in the short run, the government spending multiplier is larger than the tax multiplier. Finally, we demonstrate that exogenous shocks to government spending account for less than 10 % of the movements in output over the business cycle in Denmark.
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