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Research Seminar by Jesper Lindé (Sveriges Riksbank)

News from May 16, 2016

Next week, Jesper Lindé of the Bank of Sweden will be the speaker of the Quantitative Economic Colloquium. He will present his research paper "Jump-Starting the Euro Area Recovery: Would a Rise in Core Fiscal Spending Help the Periphery?" on Thursday, May 26, 5-7 pm at Kaminzimmer (room 202), Boltzmannstraße 20, Berlin-Dahlem.

Abstract
:
We show that a fiscal expansion by the core economies of the euro area would have a large and positive impact on periphery GDP assuming that policy rates remain low for a prolonged period. Under our preferred model specification, an expansion of core government spending equal to one percent of euro area GDP would boost periphery GDP around 1 percent in a liquidity trap lasting three years, nearly half as large as the effect on core GDP. Accordingly, under a standard ad hoc loss function involving output and inflation gaps, increasing core spending would generate substantial welfare improvements, especially in the periphery. The benefits are considerably smaller under a utility-based welfare measure, reflecting in part that higher net exports play a material role in raising periphery GDP.


For further information about the Quantitative Economic Colloquium and its program, please click here.

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