When Is the Government Transfer Multiplier Large?
Transfers to individuals were a larger part of the 2009 US stimulus package than government purchases. Using a two-agent New Keynesian model, we show analytically that the multiplier on targeted transfers to financially constrained households is (i) larger than the purchase multiplier if the zero lo...
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2018
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| Online Access: | http://hdl.handle.net/10986/29203 |
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okr-10986-292032021-05-25T10:54:43Z When Is the Government Transfer Multiplier Large? Giambattista, Eric Pennings, Steven FISCAL TRANSFERS FISCAL POLICY FISCAL STIMULUS GOVERNMENT SPENDING MULTIPLIERS NEW-KEYNESIAN MODEL ZERO LOWER BOUND MONETARY POLICY Transfers to individuals were a larger part of the 2009 US stimulus package than government purchases. Using a two-agent New Keynesian model, we show 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 ZLB binds — the extra inflation from lower supply boosts the multiplier. We show this result also holds quantitatively in a medium-scale version of the model. 2018-01-22T16:11:41Z 2018-01-22T16:11:41Z 2017-11 Journal Article European Economic Review 0114-2921 http://hdl.handle.net/10986/29203 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Elsevier Publications & Research :: Journal Article Publications & Research United States |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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FISCAL TRANSFERS FISCAL POLICY FISCAL STIMULUS GOVERNMENT SPENDING MULTIPLIERS NEW-KEYNESIAN MODEL ZERO LOWER BOUND MONETARY POLICY |
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FISCAL TRANSFERS FISCAL POLICY FISCAL STIMULUS GOVERNMENT SPENDING MULTIPLIERS NEW-KEYNESIAN MODEL ZERO LOWER BOUND MONETARY POLICY Giambattista, Eric Pennings, Steven When Is the Government Transfer Multiplier Large? |
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United States |
| description |
Transfers to individuals were a larger part of the 2009 US stimulus package than government purchases. Using a two-agent New Keynesian model, we show 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 ZLB binds — the extra inflation from lower supply boosts the multiplier. We show this result also holds quantitatively in a medium-scale version of the model. |
| format |
Journal Article |
| 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 |
Elsevier |
| publishDate |
2018 |
| url |
http://hdl.handle.net/10986/29203 |
| _version_ |
1764468756672675840 |