Welfare and bond pricing implications of fiscal stabilization policies
نویسنده
چکیده
How do cyclical fiscal stabilisation policies affect welfare and government bond risk premia? Using a new Keynesian model we find that the effects of fiscal policy rules on the bond premium and welfare crucially depend on the source of business cycle fluctuations. The overall effect is estimated using Bayesian methods and the mechanism is deconstructed by examining the propagation mechanism of the different shocks. We find that the impact of fiscal policy cyclicality on welfare and risk premia is highly non-linear and that these effects are of a policy relevant magnitude. Finally, we find that the welfare cost of highly procyclical fiscal policies are very large, but also excessive fiscal stabilization can generate nonnegligible welfare losses.
منابع مشابه
Long-Run Fiscal Uncertainty, Growth and Asset Prices
Following massive government interventions during the great recession of 20072009, governments’ indebtedness has skyrocketed around the globe. These dramatic financing needs raise uncertainty about the future stance of fiscal policies and their effects on the growth prospects of the economy. In this paper, we reconsider the link between short-run stabilization and uncertainty about long-term fi...
متن کاملFiscal Stabilization in the EMU
We explore the welfare implications of several scal policies in an estimated two-country New Open Economy Macroeconomics (NOEM) model of the European Monetary Union (EMU). The model features incomplete nancial markets, home bias in nal consumption baskets and in input utilization. We rstly de ne the optimal policy. In addition to the optimal provision of public goods, the optimal policy inv...
متن کاملImpacts of government interventions on pricing policies of the dual-channel supply chain by considering retailer services
In this study, the implications of the government’s tariffs on optimal pricing decisions in a dual-channel SC with one manufacturer and one retailer by taking into account the retailer services are examined. First, the best response strategies of retailer and manufacturer have obtained following the government’s tariffs by using a Stackelberg game model. Then, the government problem has modeled...
متن کاملOverturning Mundell: Fiscal Policy in a Monetary Union
Central to ongoing debates over the desirability of monetary unions is a supposed trade-off, outlined by Mundell [1961]: a monetary union reduces transactions costs but renders stabilization policy less effective. If shocks across countries are sufficiently correlated, then, according to this argument, delegating monetary policy to a single central bank is not very costly and a monetary union i...
متن کاملMacroeconomic stabilization policies in the EMU : spillovers , asymmetries , and institutions
This paper studies the institutional design of the coordination of macroeconomic stabilization policies within a monetary union in the framework of linear quadratic differential games. A central role in the analysis plays the partitioned game approach of the endogenous coalition formation literature. The specific policy recommendations in the EMU context depend on the particular characteristics...
متن کامل