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Optimal Monetary and Fiscal Policy at Zero Lower Bound
Šestořád, Tomáš ; Potužák, Pavel (advisor) ; Kadeřábková, Božena (referee)
This thesis concerns the interaction of monetary and fiscal policy. Using New Keynesian model, we show the impact of fiscal expansion under different specifications of monetary policy rules. The analysis of the transmission of fiscal expansion focuses on the situation in which central bank's nominal interest rate reaches zero lower bound. We verify the economic model using vector autoregression based on data of the United States. The results of the theoretical and empirical research suggest that the influence of government spending on the product is greater at the zero lower bound.
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Dynamics of Linear Forward-looking Structural Macroeconomic Models at the Zero Lower Bound: Do Solution Techniques Matter?
Brůha, Jan
Yes, they do matter, sometimes a lot. In this paper, I compare various solution techniques that can be used to solve structural forward-looking macroeconomic models subject to the zero lower bound as the only non-linearity. I use stylized forward-looking models to compare the solution techniques based on impulse responses, on the implications of forward guidance, on the values of fiscal multipliers, and on solution accuracy. I disprove recent claims in the literature that various solution methods yield identical dynamics. The solutions are equivalent only if the zero lower bound constraint binds for no more than one period, otherwise the implied dynamics can be different. Moreover, I find that large effects of forward guidance and large fiscal multipliers at the zero lower bound are found especially when models are solved using ‘shadow’ shocks. On the other hand, the occasional-binding toolbox and solutions based on a non-linear deterministic solver imply small effects of forward guidance and fiscal multipliers that are not significantly larger at the zero lower bound than during normal times. Moreover, these two types of solutions seem to be the most accurate.
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Fiscal policy and the business cycle in the Czech Republic
Jeřábek, Martin ; Ševčík, Miroslav (advisor) ; Řežábek, Pavel (referee)
This thesis deals with short-term relationship between fiscal policy and the real economy. Thesis is divided into three thematic units. In the first part through the analysis of studies examining the size of fiscal multipliers concludes, that depending on the assumptions and selected time period is the size of the multipliers greater in economic recessions, at zero interest rates of central banks or bigger taciturnity of the economy. The multipliers for the Czech Republic are low and did not exceed the value of one. The thesis also analyzes the development of public finances in the years 1997 - 2013 and identifies as their basic problem the structural nature of deficits. As a possible tool to improve the inclination of public finance to the budget deficits are identified fiscal rules limiting public spending. This rule is fully compatible with the Stability and Growth Pact and meets the basic requirements - the clarity and flexibility.
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