When is the Government Transfer Multiplier Large?
Transfers to individuals were a larger part of the 2009 U.S. stimulus package than government purchases. Using a two-agent New Keynesian model, this paper shows analytically that the multiplier on targeted transfers to financially constrained house...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/786831504723306335/When-is-the-government-transfer-multiplier-large http://hdl.handle.net/10986/28361 |
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okr-10986-283612021-06-08T14:42:48Z When is the Government Transfer Multiplier Large? Giambattista, Eric Pennings, Steven TRANSFERS MONETARY MULTIPLIER AGGREGATE DEMAND INFLATION Transfers to individuals were a larger part of the 2009 U.S. stimulus package than government purchases. Using a two-agent New Keynesian model, this paper shows analytically that the multiplier on targeted transfers to financially constrained households is (i) larger than the purchase multiplier if the zero lower bound (ZLB) binds, and (ii) is more sensitive to the degree of monetary accommodation of inflation. Targeted transfers provide the same boost to demand as purchases, but lower aggregate supply relative to purchases, as those receiving transfers want to work less. When the aggregate demand curve inverts, such as when the zero lower bound binds, the extra inflation from lower supply boosts the multiplier. This result also holds quantitatively in a medium-scale version of the model. 2017-09-21T18:31:30Z 2017-09-21T18:31:30Z 2017-09 Working Paper http://documents.worldbank.org/curated/en/786831504723306335/When-is-the-government-transfer-multiplier-large http://hdl.handle.net/10986/28361 English en_US Policy Research Working Paper;No. 8184 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper United States |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
TRANSFERS MONETARY MULTIPLIER AGGREGATE DEMAND INFLATION |
| spellingShingle |
TRANSFERS MONETARY MULTIPLIER AGGREGATE DEMAND INFLATION Giambattista, Eric Pennings, Steven When is the Government Transfer Multiplier Large? |
| geographic_facet |
United States |
| relation |
Policy Research Working Paper;No. 8184 |
| description |
Transfers to individuals were a larger
part of the 2009 U.S. stimulus package than government
purchases. Using a two-agent New Keynesian model, this paper
shows analytically that the multiplier on targeted transfers
to financially constrained households is (i) larger than the
purchase multiplier if the zero lower bound (ZLB) binds, and
(ii) is more sensitive to the degree of monetary
accommodation of inflation. Targeted transfers provide the
same boost to demand as purchases, but lower aggregate
supply relative to purchases, as those receiving transfers
want to work less. When the aggregate demand curve inverts,
such as when the zero lower bound binds, the extra inflation
from lower supply boosts the multiplier. This result also
holds quantitatively in a medium-scale version of the model. |
| format |
Working Paper |
| author |
Giambattista, Eric Pennings, Steven |
| author_facet |
Giambattista, Eric Pennings, Steven |
| author_sort |
Giambattista, Eric |
| title |
When is the Government Transfer Multiplier Large? |
| title_short |
When is the Government Transfer Multiplier Large? |
| title_full |
When is the Government Transfer Multiplier Large? |
| title_fullStr |
When is the Government Transfer Multiplier Large? |
| title_full_unstemmed |
When is the Government Transfer Multiplier Large? |
| title_sort |
when is the government transfer multiplier large? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/786831504723306335/When-is-the-government-transfer-multiplier-large http://hdl.handle.net/10986/28361 |
| _version_ |
1764466707512950784 |