Working Paper presents research work by both Danmarks Nationalbank’s employees and our partners. The series is primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Financial sector

Working Paper: Fiscal tools at the zero lower bound

The paper analyses the effectiveness of fiscal tools at the zero lower bound (ZLB) in a non-linear New Keynesian DSGE model. Although the government spending multiplier increases at the ZLB, its size depends strongly on rational expectations to the liquidity trap length. In light of this finding, market expectations in the beginning of 2009 might indicate that expectations to the American Recovery and Reinvestment Act were too optimistic.