2022/03/07 by CHIARA PUNZO, Chiara Punzo, Lorenza Rossi +1 · 11 citations
Economics, Econometrics and Finance · #Debt #Economics #Fiscal Policies and Political Economy #Fiscal Policy and Economic Growth #Housing Market and Economics #Liquidity crisis #Liquidity trap #Macroeconomics #Market economy #Market liquidity #Monetary economics #Redistribution (election) #Social Welfare #Stimulus (psychology) #Welfare
paper · doi:10.1111/jmcb.12926
published in Journal of money credit and banking 55(2-3), 595-617 (Wiley)
openalex publication_date 2022/03/07 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
Abstract We analyze the redistribution channel of a money‐financed fiscal stimulus (MFFS) versus debt‐financed fiscal stimulus (DFFS) in a Borrower–Saver framework. The redistribution channel is larger when we consider an MFFS and borrowers are the main beneficiaries. A liquidity trap scenario amplifies the differences between an MFFS and a DFFS. The redistribution channel makes an MFFS effective at having an expansionary effect in the medium run, despite the adverse scenario. We show, however, that an MFFS increases the consumption gap between the two agents by redistributing income from savers to borrowers. Thus, an MFFS results detrimental for welfare when the welfare function is approximated around the efficient steady state.