Fiscal Policy in a Tractable Liquidity‐Constrained Economy
Bibliographic Data
| ID | 9713528 |
|---|---|
| Authors | Edouard Challe (Ecole Polytechnique and Banque de France), Xavier Ragot (Banque de France and Paris School of Economics) |
| Year | 2011 |
| Volume | 121 |
| Issue | 551 |
| Pages | 273-317 |
| Publication date | 2011-03-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/j.1468-0297.2010.02399.x |
| OpenAlex | W2295393396 |
| Language | EN |
| Citations received | 1 |
| References cited | 30 |
We analyse the effects of fiscal expansions when public debt is used as liquidity by the private sector. Aggregate shocks are introduced into an incomplete-market economy where heterogenous agents face occasionally binding borrowing constraints and store wealth to smooth out idiosyncratic income fluctuations. Debt‐financed increases in spending facilitate self‐insurance by bond holders and may crowd in private consumption. They also loosen the borrowing constraints faced by firms, thereby raising labour demand and possibly the real wage. Whether private consumption and wages rise or fall ultimately depends on the relative strengths of the liquidity and wealth effects that arise following the shock
Bond · Bond market · Consumption (sociology · Crowding out · Debt · Economics · Fiscal policy · Incomplete markets · Labour economics · Liquidity constraint · Macroeconomics · Market liquidity · Microeconomics · Monetary economics · Private sector · Shock (circulatory · Wage · Banking stability, regulation, efficiency · Economic theories and models · Economic Theory and Policy · Finance
Understanding the Effects of Government Spending on Consumption
An Equilibrium Model of “Global Imbalances” and Low Interest Rates
Costly capital reallocation and the effects of government spending
Uninsured Idiosyncratic Risk and Aggregate Saving
Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing
Private and Public Supply of Liquidity
Income and Wealth Heterogeneity in the Macroeconomy
Credit Cycles
| Unique citing works | 1 |
|---|---|
| Citations per year | 0,1 |
| Citation span | 2016 - 2016 (1) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 1 |