Do government policy multipliers decrease with inflation?

We use cross-country data to examine the effects of inflation on government spending and monetary policy multipliers. In contrast to earlier work by Ball, Mankiw, and Romer (1988) and Defina (1991), we allow for differential impacts of both the monetary base and government spending, and this differe...

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Bibliographic Details
Published in:Journal of monetary economics 1996-12, Vol.38 (3), p.495-505
Main Authors: Koelln, Kenneth, Rush, Mark, Waldo, Doug
Format: Article
Language:English
Subjects:
Economic models
Government policy
Government spending
Inflation
Keynesian theory
Manycountries
Monetary economics
Monetary policy
Multiplier
New Keynesian
Price increases
Sticky prices
Studies
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Summary:We use cross-country data to examine the effects of inflation on government spending and monetary policy multipliers. In contrast to earlier work by Ball, Mankiw, and Romer (1988) and Defina (1991), we allow for differential impacts of both the monetary base and government spending, and this difference turns out to be empirically quite important. We find little evidence in favor of a New Keynesian, sticky price model.
ISSN:0304-3932
1873-1295
DOI:10.1016/S0304-3932(96)01289-5