Debt Consolidation and Fiscal Stabilization of Deep Recessions

Corsetti, Giancarlo; Kuester, Keith; Meier, André; Müller, Gernot

doi:10.1257/aer.100.2.41

Cited by 133 publications

(97 citation statements)

References 2 publications

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“…They find that fiscal stimulus was effective in a low interest rate environment, which is in contradiction to previous studies on that period. In addition to those studies, Corsetti et al (2010) use a standard new Keynesian model with a zero bound on interest rates to show that anticipation of the medium-term spending cuts usually enhances the expansionary effects of a short-run fiscal stimulus. They advise not to withdraw stimulus too early in favour of spending cuts, as this may lower fiscal multipliers and lengthen the zero lower bound episode.…”

Section: Discussionmentioning

confidence: 99%

Taxation and the Financial Crisis

Alworth¹,

Arachi²

2012

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BookTaxation and the Financial Crisis 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.

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Section: Discussionmentioning

confidence: 99%

Taxation and the Financial Crisis

Alworth¹,

Arachi²

2012

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“…The theoretical work of Modigliani (1961), Diamond (1965) and Saint-Paul (1992), which are based on the neoclassical growth model, suggested that government debt is likely to slow economic growth. Corsetti et al (2010) stressed the need to eliminate fiscal imbalances and reduce government debt -particularly if the impact of monetary policy is limited due to an inoperative interest rate channel. Writing before the fiscal crisis, Schclarek (2004) claimed that the impact of government debt depends on the maturity of the economy in question.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Whereas prominent theoretical works of the 1960s, such as those of Modigliani (1961) and Diamond (1965), suggested that high government debt has a negative impact on economic growth, recent research (Corsetti et al 2010;Checherita & Rother 2010;Kumar & Woo 2015) has been inconclusive. The impact of monetary policy on FAI has been less ambiguous: investment falls in periods of restrictive monetary policy (Bernanke & Gilchrist 1996;Peersman & Smets 2002;Angelopoulou & Gibson 2009;Masuda 2015).…”

Section: Introductionmentioning

confidence: 99%

The Impact of the Monetary-fiscal Policy Mix and Financialisation on Fixed Asset Investment in the EU in 1999–2014

Malinowska

2016

AOC

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This paper explores the combined impact of tight monetary policy, government debt, budgetary deficit, financialisation, and financial leverage on the fixed asset investment (FAI) of non-financial private firms in EU countries in the 1999-2014 period. I estimate eight static fixed-effects models and test for six hypotheses. While inconclusive regarding the combined impact of tight monetary policy and government debt, the results suggest that the influence of monetary policy was limited only to the euro area, suggesting that national monetary policies were inconsequential with regard to changes in FAI. Despite the detrimental effects of financialisation, the findings highlight that cash flows generated from the sector's financial assets might serve as an internal source of FAI funding that strongly correlates with monetary contractions. The findings also highlight the possibility of an active balance sheet channel. However, given the macro-level character of the data, further research on the micro-level might provide more insight into specific issues.

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“…Yet, it is hard to believe that private agents failed to anticipate the need for budget corrections via mix of spending cuts and tax increases at some point in the future, see Corsetti et al (2010b) for further discussion.…”

Section: Lessons For Cooperationmentioning

confidence: 99%

Multilateral Economic Cooperation and the International Transmission of Fiscal Policy

Corsetti¹,

Müller²

2011

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During the global financial crisis 2007-2009 fiscal policy was widely used as a stabilization tool. Policymakers allowed a large build-up of public debt resulting from both automatic and discretionary expansionary measures. At the same time, calls for policy coordination stressed that international spillovers of fiscal policy might be sizeable. We reconsider the case for fiscal coordination by providing new evidence on the cross-border effects of discretionary fiscal measures. We rely on a vector autoregression model as well as on a quantitative business cycle model. We find that i) large spillover effects cannot be ruled out and, in contrast to conventional wisdom, ii) financial factors rather than trade flows lie at the heart of the international transmission mechanism. We discuss the implications of these results for policy coordination when markets price sovereign default risk, and put pressure on governments for implementing budget consolidation measures.

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Debt Consolidation and Fiscal Stabilization of Deep Recessions

Cited by 133 publications

References 2 publications

Taxation and the Financial Crisis

Taxation and the Financial Crisis

The Impact of the Monetary-fiscal Policy Mix and Financialisation on Fixed Asset Investment in the EU in 1999–2014

Multilateral Economic Cooperation and the International Transmission of Fiscal Policy

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