# Is Government Spending at the Zero Lower Bound Desirable?

@article{Bilbiie2019IsGS, title={Is Government Spending at the Zero Lower Bound Desirable?}, author={Florin O. Bilbiie and Tommaso Monacelli and Roberto Perotti}, journal={Political Economy: Government Expenditures \& Related Policies eJournal}, year={2019} }

We build a medium-scale DSGE model and calibrate it to fit the main macroeconomic variables during the US Great Recession. Using it to evaluate the welfare effects of increasing government consumption at the zero lower bound beyond what was actually observed in the data, we reach three main results. First, the increase in government consumption after 2008, albeit small in present value terms, was close to optimal. Second, frontloading the same stimulus would have been welfare-improving. Third…

## 44 Citations

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- Economics
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- EconomicsMacroeconomic Dynamics
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Some recent empirical evidence questions the typically large size of government spending multipliers when the nominal interest rate is stuck at zero, finding output multipliers of around 1 or even…

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