Fiscal Stimulus and Distortionary Taxation / Thorsten Drautzburg, Harald Uhlig.

Format:

Book

Author/Creator:

Drautzburg, Thorsten.

Contributor:

National Bureau of Economic Research.

Uhlig, Harald.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17111.

NBER working paper series no. w17111

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.52 and modestly negative long-run multipliers around -0.42. The multiplier is sensitive to the fraction of transfers given to credit-constrained households, the duration of the zero lower bound and the capital. The stimulus results in negative welfare effects for unconstrained agents. The constrained agents gain, if they discount the future substantially.

Notes:

Print version record

June 2011.