BoE economist warns of tendency to ‘overstate’ fiscal multipliers


Fiscal multipliers when interest rates are at the zero lower bound are "likely to be overstated" in simple Keynesian models, according to Matthias Paustian, an economist at the Bank of England.

Speaking at the Royal Economic Society annual conference in London yesterday, Paustian considered how to model fiscal policy at the zero lower bound, alongside two other academics.

He suggests that simpler models with no "endogenous bells and whistles" can produce unrealistically large fiscal multipliers

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