کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
964964 | 930671 | 2011 | 22 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: Cooperative fiscal policy at the zero lower bound Cooperative fiscal policy at the zero lower bound](/preview/png/964964.png)
This paper investigates the use of fiscal policy in response to a large negative aggregate demand shock which may push the global economy into a liquidity trap. Fiscal policy may be an effective tool to respond to a liquidity trap, but its international spillover effects may operate quite differently from its domestic effects. We derive the optimal cooperative fiscal response to a global liquidity trap in a two country world economy. Surprisingly, we find that the optimal fiscal spending response for a partner country to a negative aggregate demand shock in a source country may be negative. If fiscal policy can be chosen under policy commitment, the optimal response involves current fiscal expansion combined with future fiscal contraction, after the liquidity trap has ended.
Journal: Journal of the Japanese and International Economies - Volume 25, Issue 4, December 2011, Pages 465–486