Public spending at the effective lower bound: how significant are the sustainability risks?

Niccolò Battistini and Giovanni Callegari

Research Bulletin, 2020, vol. 67

Abstract: With monetary policy constrained by the effective lower bound (ELB), the debt sustainability implications of a fiscal expansion are a pressing concern. In a general equilibrium model of fiscal limits, we find that the adverse impact of a fiscal expansion on sustainability is muted at the ELB compared with normal times. Getting the timing of public spending increases right, however, is essential for containing sustainability risks. JEL Classification: E52, E61, E63

Keywords: ELB; Fiscal sustainability; Monetary policy (search for similar items in EconPapers)
Date: 2020-02
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