A1247
Title: Effects of a money-financed fiscal stimulus without irredeemability of money
Authors: Eiji Okano - Nagoya City University (Japan) [presenting]
Masataka Eguchi - Nagoya City University (Japan)
Roberto Billi - Sveriges Riksbank (Sweden)
Abstract: The purpose is to analyze the effectiveness of a money-financed fiscal stimulus (MF) without irredeemability of money (IM). Although the effectiveness of the MF fiscal stimulus without the IM is weaker than that of the MF fiscal stimulus with the IM, that of the MF fiscal stimulus without the IM is more substantial than a conventional debt-financed (DF) fiscal stimulus. This finding is applicable either in normal times or in a liquidity trap. It assumes not only a closed economy but also a two-country economy. It is found that as the size of a home country increases, the effectiveness of the MF fiscal stimulus without the IM increases, although that of the MF fiscal stimulus with the IM decreases as the size of a home country increases. In addition, it is found that the effectiveness of global MF fiscal stimulus without the IM amid a liquidity trap is more substantial than that of DF fiscal stimulus.
