Effects of Fiscal Policy on Credit Markets / Alan J. Auerbach, Yuriy Gorodnichenko, Daniel Murphy.

Format:

Book

Author/Creator:

Auerbach, Alan J.

Contributor:

National Bureau of Economic Research.

Gorodnichenko, Yuriy.

Murphy, Daniel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26655.

NBER working paper series no. w26655

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Credit markets typically freeze in recessions: access to credit declines and the cost of credit increases. A conventional policy response is to rely on monetary tools to saturate financial markets with liquidity. Given limited space for monetary policy in the current economic conditions, we study how fiscal stimulus can influence local credit markets. Using rich geographical variation in U.S. federal government contracts, we document that, in a local economy, interest rates on consumer loans decrease in response to an expansionary government spending shock.

Notes:

Print version record

January 2020.