Séminaire Cournot – Mathias KLEIN (Sveriges Riksbank)

Détails de l'événement :

Mathias KLEIN (Sveriges Riksbank)

présentera

The Fiscal Channel of Monetary Policy

(with Max Breitenlechner and Martin Geiger)

Abstract: This paper studies the fiscal channel in the monetary policy transmission. We document that a contractionary monetary policy shock besides lowering output and prices leads to a pronounced adjustment in fiscal measures and a significant increase in the fiscal deficit. We then investigate different scenarios in which we shut down the endogenous responses of fiscal measures following a monetary policy shock. The impact of a monetary policy shock on output is more than halved by the endogenous adjustment in tax revenues, whereas the public transfer system significantly reduces the impact on prices. In scenarios in which we assume a balanced budget after monetary policy shocks, we find that U.S. monetary policy shocks would have much larger output and price effects compared to the prevailing regime. Our findings reveal that fiscal policy matters a great deal for the overall macroeconomic impact of a monetary policy shock and can even enhance the monetary effects if appropriately designed.

To know more about Mathias KLEIN : https://sites.google.com/site/mathiaswklein/

Zoom link :https://us02web.zoom.us/j/83942604832