Dynamic Fiscal Limits and Monetary-Fiscal Policy Interactions

Battistini, Niccolò; Callegari, Giovanni; Zavalloni, Luca

doi:10.2139/ssrn.3374165

Cited by 6 publications

(7 citation statements)

References 35 publications

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“…8 The correlation between cyclical swings in output and government consumption, for example, has turned from positive (procyclical) before the global financial crisis to negative (countercyclical) after the crisis. In advanced economies, proactive fiscal policy has gained in importance in the past decade, at least potentially, as monetary policy interest rates have approached or breached the zero lower bound (Battistini, Callegari, and Zavalloni 2019).…”

Section: A Spending Needs In Emdesmentioning

confidence: 99%

Global Waves of Debt: Causes and Consequences

Köse¹,

Nagle²,

Ohnsorge³

et al. 2021

108

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Some rights reserved 1234 24232221This work is a product of the staff of The Wotld Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility fot any errors, omissions, or discrepancies in the infotmation, or liability with tespect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.Nothing herein shall constitute ot be construed or considered to be a limitation upon ot waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.

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Section: A Spending Needs In Emdesmentioning

confidence: 99%

Global Waves of Debt: Causes and Consequences

Köse¹,

Nagle²,

Ohnsorge³

et al. 2021

108

View full text Add to dashboard Cite

show abstract

“…Our model includes capital, allowing interest rates to affect saving decisions between capital and government bonds. Capital is often absent in models involving fiscal limits (e.g., Bi et al 2013, Corsetti et al 2013and Battistini et al 2019). The baseline model features a typical one-period bond, although later we allow for a longer debt maturity.…”

Section: The Modelmentioning

confidence: 99%

“…Lastly, we contrast our baseline model with capital to an alternative that abstracts from capital. Most new Keynesian models with fiscal limits in the literature do not include capital, including Bi (2012) and Battistini et al (2019), for computational easiness. This simulation shows that capital plays an important role in the model dynamics in response to a macroeconomic shock.…”

Section: The Role Of Capitalmentioning

confidence: 99%

“…Our paper is closely related to Battistini et al (2019), who also study monetary and fiscal policy interactions with fiscal limits. They rely on the peak of the Laffer curve to simulate fiscal limits following Bi (2012).…”

Section: Introductionmentioning

confidence: 99%

“…Battistini et al (2019) use the average of EU-14 data to calibrate the model, which has much higher levels of government spending and transfers as shares of GDP than those of the US federal government.…”

mentioning

confidence: 99%

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Fiscal implications of interest rate normalization in the United States

Bi¹,

Shen²,

Yang³

2022

Canadian J of Economics

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We study the fiscal implications of interest rate normalization from the zero lower bound (ZLB) in the United States. At the ZLB, falling tax revenues and real bond prices increase government debt accumulation. During normalization, interest payments remain above the path without the ZLB, and government debt can increase further despite the recovery of output and tax revenues. Against the yardstick of ability to pay, interest rate normalization is unlikely to threaten federal debt sustainability at the current net federal debt level about 100% of GDP. If the government fails to reform Social Security and major healthcare programs, sovereign default risk can rise more quickly when debt reaches 150% of GDP. Also, a more active monetary policy anchors inflation expectations better, generates a faster recovery and, hence, slows down debt accumulation more than a less active one does. An unexpected early liftoff, however, can prolong a recession and increase debt accumulation more at the ZLB and during normalization. Résumé. Répercussions fiscales de la normalisation des taux d'intérêt aux États-Unis.Nous étudions les répercussions fiscales de la normalisation des taux d'intérêt du taux plancher zéro aux États-Unis. Au taux plancher zéro, la diminution des recettes fiscales et des coûts des obligations réels fait grimper la dette publique. Pendant la normalisation, les paiements d'intérêt restent supérieurs au parcours sans taux plancher zéro. En dépit du redressement de la production et des recettes fiscales, la dette publique peut prendre

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Fiscal space in the COVID-19 pandemic

Hürtgen

2021

Applied Economics

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Dynamic Fiscal Limits and Monetary-Fiscal Policy Interactions

Cited by 6 publications

References 35 publications

Global Waves of Debt: Causes and Consequences

Global Waves of Debt: Causes and Consequences

Fiscal implications of interest rate normalization in the United States

Fiscal space in the COVID-19 pandemic

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