Series: IMF Working Papers
Author(s): Ruoyun Mao , and Shu-Chun Susan Yang
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 12 June 2020
Keywords: Economic conditions, Financial crises, Real interest rates, Business cycles, Economic sectors, government spending effects, fiscal multiplier, regime-switching policy, monetary and fiscal policy interaction, nonlinear New Keynesian models
The theoretical literature generally finds that government spending multipliers are bigger than unity in a low interest rate environment. Using a fully nonlinear New Keynesian model, we show that such big multiplie...