A Money-Financed Fiscal Stimulus : Redistribution and Social Welfare

Chiara, Punzo and Rossi, Lorenza (2023) A Money-Financed Fiscal Stimulus : Redistribution and Social Welfare. Journal of Money, Credit and Banking, 55 (2-3). pp. 595-617. ISSN 0022-2879

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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.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Money, Credit and Banking
Additional Information:
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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?? borrowers–saversfiscal stimulifiscal multiplierswelfarenofinanceeconomics and econometricsaccounting ??
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Deposited On:
03 May 2022 12:05
Last Modified:
01 May 2024 23:32