Two fiscal policy puzzles revisited: New evidence and an explanation

Iwata, Yasuharu

doi:10.1016/j.jimonfin.2012.11.015

Cited by 24 publications

(28 citation statements)

References 40 publications

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“…All firms produce differentiated goods with a production function is the labor input, G t K is the stock of public infrastructure, and is the output elasticity of public infrastructure. We assume a positive  , which implies that the production function has increasing returns with respect to public infrastructure, as in Basu and Kollmann (2013), Bom and Ligthart (2014), Leduc and Wilson (2013) and Iwata (2013).…”

Section: Supply Side: Firmsmentioning

confidence: 99%

The Welfare Multiplier of Public Infrastructure Investment

Ganelli

Tervala²

2016

IMF Working Papers

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We analyze the welfare multipliers of public spending (the consumption equivalent change in welfare for one dollar change in public spending) in a DSGE model. The welfare multipliers of public infrastructure investment are positive if infrastructure is sufficiently effective. When the medium-term output multipliers are consistent with the empirical estimates (1-1.4), the welfare multiplier is 0.8. That is, a dollar spent by the government for investment raises domestic welfare by equivalent of 0.8 dollars of private consumption. This suggests that the welfare gains of public infrastructure investment, if chosen wisely, may be substantial.

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Section: Supply Side: Firmsmentioning

confidence: 99%

The Welfare Multiplier of Public Infrastructure Investment

Ganelli

Tervala²

2016

IMF Working Papers

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“…The calvo sticky price parameters; p's were 0.87, 0.81 and 0.95, which indicated that prices were marked up at approximately one year in the three economies, respectively. The interest rate smoothing estimates; mp were 0.94, 0.86 and 0.79; They were around the estimated interest rate persistence; 0.92 was obtained by Drautzburg and Uhlig (2015), 0.80by Iwata (2013) and 0.74 -by Bhattarai and Trzeciakiewicz (2017). The estimated monetary response to inflation mπ was 1.34, 1.21 and 1.23; this evidence showed a gradual weakness in the monetary policy control on inflation.…”

Section: Panel 3 Exclusive Inflation Targeting Monetary and Low Fiscmentioning

confidence: 61%

“…The calibrated output gap is the estimated policy makers' responses to output deviation from the equilibrium. This parameter is informed by the influential papers of Drautzburg and Uhlig (2015), Iwata (2009Iwata ( , 2013, Bhattarai and Trzeciakiewicz (2017), and Cochrane (2017Cochrane ( , 2018. For the fiscal instruments, we estimated the share of government spending in the gross domestic products from 1970 to 2018.…”

Section: Bayesian Estimationmentioning

confidence: 99%

“…The risk averseness ρs was estimated 1.25, 1.12 and 0.95. It was evaluated within the neighbourhoods of 1.17 by Drautzburg and Uhlig (2015) for the US data, 1.13 obtained by Iwata (2013) for the Japanese data, and 0.95 obtained by Bhattarai and Trzeciakiewicz (2017) for the UK data. The calvo sticky wage, ω's was 0.88, 0.75 and 0.60, which indicated that wage adjustment occurred approximately every fourth quarter in the USA, third quarter in Japan and the UK.…”

Section: Panel 3 Exclusive Inflation Targeting Monetary and Low Fiscmentioning

confidence: 99%

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New Keynesian Liquidity Trap and Conventional Fiscal Stance: An Estimated DSGE Model

Shobande

Shodipe

2019

Economics and Business

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The study investigates the effect of New Keynesian liquidity trap on fiscal stance in the United States, United Kingdom and Japan economies. We developed our DSGE model in the context of an optimal and persistent interactive fiscal policy, which allows us to track the transmission channel through which shocks are distributed among real economic variables. The evidence suggests that zero lower bound mitigates the ability of monetary policy to absorb the effect of exogenous shock on the macroeconomic variables while expansionary fiscal policy was able to absorb the shock persistence transmitted from the nominal interest rate.

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“…This causes roughly a one percent fall in domestic output relative to the initial steady state. The persistence of …scal shocks ( G ) is set to 0.75, based on the …ndings of Iwata (2013). We assume that the size of a domestic …scal shock ("…”

Section: Symmetric Equilibriummentioning

confidence: 99%

Hysteresis and Fiscal Policy

Engler

Tervala

2016

SSRN Journal

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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. Abstract Empirical studies support the hysteresis hypothesis that recessions have a permanent e¤ect on the level of output. We analyze the implications of hysteresis for …scal policy in a DSGE model. We assume a simple learning-by-doing mechanism where demand-driven changes in employment can a¤ect the level of productivity permanently, leading to hysteresis in output. We show that the …scal output multiplier is much larger in the presence of hysteresis and that the welfare multiplier of …scal policy-the consumption equivalent change in welfare for one dollar change in public spending-is positive (negative) in the presence (absence) of hysteresis. The main bene…t of accommodative …scal policy in the presence of hysteresis is to diminish the damage of a recession to the long-term level of productivity and, thus, output. Terms of use: Documents in

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Two fiscal policy puzzles revisited: New evidence and an explanation

Cited by 24 publications

References 40 publications

The Welfare Multiplier of Public Infrastructure Investment

The Welfare Multiplier of Public Infrastructure Investment

New Keynesian Liquidity Trap and Conventional Fiscal Stance: An Estimated DSGE Model

Hysteresis and Fiscal Policy

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