Project Details
Projekt
Monetary and fiscal policy in times of crisis
Applicant
Professor Dr. Andreas Schabert
Subject Area
Economic Theory
Economic Policy, Applied Economics
Economic Policy, Applied Economics
Term
from 2012 to 2020
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 201546844
This project aims at analyzing monetary and fiscal policy in the aftermath of the subprime crisis. The crisis has led monetary and fiscal policy makers in industrialized countries to conduct policy beyond well-explored terrain. Monetary policy rates are held close to the zero lower bound and central banks aimed at easing the monetary stance in a quantitative way. At the same time, fiscal spending has boosted public debt and raised fears of sovereign default in several countries. These developments and the effects of monetary and fiscal policy can hardly be understood by applying pre-2008 state-of-the-art macroeconomic models. In particular, it is unclear i.) how the transmission of monetary and fiscal policy is affected by extraordinary circumstances, like interest rates at the zero lower bound, excessive liquidity demand, or high credit default probabilities, and ii.) if monetary and fiscal policy should be conducted in ways that differ from non-crisis times. To contribute to these issues, we develop and analyze macroeconomic models that account for features of financial and money markets that played a particularly important role after the breakdown of Lehman Brothers. Based on these models, the macroeconomic effects of monetary and fiscal policy recently implemented by several industrialized countries will be quantified. In particular, we analyze the impact of unconventional monetary policy, like quantitative and credit easing, on real activity and prices, the effects of fiscal policies on aggregate demand when the policy rate is at the zero lower bound, and public policy under sovereign default risk.
DFG Programme
Priority Programmes
