European Business Schools Librarian's Group
HEC Research Papers Series,
HEC Paris
No 1546: Fiscal Responses to Monetary Policy: Insights from a Survey of Government Officials
Andreas Dibiasi, Heiner Mikosch, Samad Sarferaz and Armin Steinbach ()
Additional contact information
Andreas Dibiasi: ETH Zürich
Heiner Mikosch: ETH Zürich - KOF Swiss Economic Institute
Samad Sarferaz: ETH Zurich
Armin Steinbach: HEC Paris; Max Planck Institute for Research on Collective Goods
Abstract: In a novel survey, we study how German senior government officials systematically adjust fiscal policy in response to economic shocks, focusing on their fiscal responses to a contractionary monetary policy shock. Using randomized vignette treatments, we examine how officials update GDP and inflation expectations under fiscal and monetary policy shock scenarios and assess their preferred fiscal adjustments. Our findings show that officials predominantly respond by increasing debt and reducing spending, with tax increases playing a minor role, often combining multiple fiscal instruments. Counterfactual analysis reveals that officials’ reasoning aligns with key insights from the Heterogeneous Agent New Keynesian literature.
Keywords: Fiscal policy; monetary policy; fiscal-monetary interaction; expectation formation; survey experiment
JEL-codes: E62
57 pages, February 10, 2025
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