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Jordi Gali (CREI)

30 November 2016 at 5:00 PM - 6:00 PM

Room 401, Campus on Viale Romania, 32

Speaker: Jordi Gali

Title: The Effects of a Money-Financed  Fiscal Stimulus


 I analyze the effects of a fiscal stimulus financed through money creation. I study the effects of both a tax cut and an increase in government purchases, and compare them with those resulting from a conventional debt-financed stimulus, with and without a binding zero lower bound on the nominal interest rate. When the ZLB is not binding, a money-financed fiscal stimulus is shown to have much larger multipliers than a debt-financed fiscal stimulus. That difference in effectiveness persists, but is much smaller, under a binding ZLB. The analysis points to the key role of nominal rigidities in shaping those effects.