Rights statement: This is the peer reviewed version of the following article: PUNZO, C. and ROSSI, L. (2023), A Money-Financed Fiscal Stimulus: Redistribution and Social Welfare. Journal of Money, Credit and Banking, 55: 595-617. https://doi.org/10.1111/jmcb.12926 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1111/jmcb.12926 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - A Money-Financed Fiscal Stimulus
T2 - Redistribution and Social Welfare
AU - Chiara, Punzo
AU - Rossi, Lorenza
N1 - This is the peer reviewed version of the following article: PUNZO, C. and ROSSI, L. (2023), A Money-Financed Fiscal Stimulus: Redistribution and Social Welfare. Journal of Money, Credit and Banking, 55: 595-617. https://doi.org/10.1111/jmcb.12926 which has been published in final form at https://onlinelibrary.wiley.com/doi/10.1111/jmcb.12926 This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
PY - 2023/3/31
Y1 - 2023/3/31
N2 - 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.
AB - 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.
KW - borrowers–savers
KW - fiscal stimuli
KW - fiscal multipliers
KW - welfare
U2 - 10.1111/jmcb.12926
DO - 10.1111/jmcb.12926
M3 - Journal article
VL - 55
SP - 595
EP - 617
JO - Journal of Money, Credit and Banking
JF - Journal of Money, Credit and Banking
SN - 0022-2879
IS - 2-3
ER -