A fiscal stimulus with deep habits and optimal monetary policy

► We study a fiscal policy in a New-Keynesian model with deep habits and optimal monetary policy. ► The fiscal multiplier is above 1 and private consumption is crowded in. ► Optimized Taylor-type or price-level rules yield results close to optimal policy. ► Private consumption is crowded out if the Taylor rule is suboptimal. ► Private consumption is crowded out also if the ability to commit is absent.