Fiscal Multiplier at the Zero Bound: Evidence from Japan

Goode, Ethan; Liu, Zheng; Nguyen, Thuy Lan

Journal Article

Fiscal Multiplier at the Zero Bound: Evidence from Japan

Abstract: The United States has implemented large-scale fiscal policy measures to help households and businesses cushion the economic fallout from the COVID-19 pandemic and to strengthen the recovery. The Federal Reserve has also supported the economy by keeping its policy rate at the zero lower bound. Evidence from Japan suggests that, in a sustained zero-bound environment, an unexpected increase in government spending has much larger and more persistent effects on real GDP, and even more so when the economy is in a recession.

Keywords: COVID-19;