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A Fiscal Stimulus with Deep Habits and Optimal Monetary Policy

Cantore, C, Melina, G, Levine, P and Yang, B (2012) A Fiscal Stimulus with Deep Habits and Optimal Monetary Policy Discussion papers in Economics.

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Abstract

A New-Keynesian model with deep habits and optimal monetary policy delivers a fiscal multiplier above one and the crowding-in effect on private consumption obtainable in a Real Business Cycle model à la Ravn et al. (2006). Optimized Taylor-type or price-level interest rate rules yield results close to optimal policy and dominate a conventional Taylor interest rate rule. Private consumption is crowded out only if the Taylor rule is sub-optimal and then negates the fiscal stimulus by responding strongly to the output gap, or if the ability to commit is absent. At the zero lower bound private consumption is always crowded in across simple rules.

Item Type: Article
Authors :
NameEmailORCID
Cantore, Cc.cantore@surrey.ac.ukUNSPECIFIED
Melina, GUNSPECIFIEDUNSPECIFIED
Levine, Pp.levine@surrey.ac.ukUNSPECIFIED
Yang, BUNSPECIFIEDUNSPECIFIED
Date : 1 February 2012
Related URLs :
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:29
Last Modified : 17 May 2017 14:35
URI: http://epubs.surrey.ac.uk/id/eprint/819973

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