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The Impact of Fiscal Policy on Macroeconomic Indicators in DSGE-models

Author

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  • Mikhail Yu. Andreyev

    (Moscow Institute of Physics and Technology, Dolgoprudny, Moscow Region 141701, Russia; Russian Presidential Academy of National Economy and Public Administration, Moscow 119571, Russia)

  • Andrey V. Polbin

    (Russian Presidential Academy of National Economy and Public Administration, Moscow 119571, Russia; Gaidar Institute for Economic Policy, Moscow 125993, Russia)

Abstract

The article reviews theoretical works on the government spending impact on the main macroeconomic indicators. Both neoclassical models with flexible prices and neo-Keynesian models with rigidities are considered by authors. As monetary policy matters in neo-Keynesian models, this work raises the problem of relationship between monetary policy and the fiscal multiplier size. Special attention is given to the peculiarities of fiscal policy in the liquidity trap. The authors examined the changes of fiscal policy effectiveness when the interest rate is at zero lower bound. At this economic situation the most effective fiscal policy is to stimulate aggregate demand, while stimulating the aggregate supply (e.g. reducing distortionary production taxes) may have a negative effect on economic activity. The article ends with conclusions about the possible fiscal policy in Russia.

Suggested Citation

  • Mikhail Yu. Andreyev & Andrey V. Polbin, 2018. "The Impact of Fiscal Policy on Macroeconomic Indicators in DSGE-models," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 21-33, June.
    • Handle: RePEc:fru:finjrn:180302:p:21-33
    DOI: 10.31107/2075-1990-2018-3-21-33
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    References listed on IDEAS

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    Cited by:

    1. Anton I. Votinov & Maria A. Elkina, 2018. "Estimation of Fiscal Stimulus Efficiency in Russian Economy: Simple DSGE Model With Government Sector," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 83-96, October.
    2. Mariia A. Elkina, 2019. "The Impact of Indirect Tax Rates Cut on Inflation: Evidence From Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 37-49, October.
    3. Sergey M. Ivashchenko, 2019. "DSGE Models: Problem of Trends," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 81-95, April.

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    More about this item

    Keywords

    general equilibrium; DSGE; Neo-Keynesian economics fiscal policy; fiscal multiplier; liquidity trap; fiscal consolidation;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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