European Business Schools Librarian's Group
HEC Research Papers Series,
HEC Paris
No 1594: Fiscal Responses to Monetary Policy: Insights From a Survey of Government Officials
Armin Steinbach, Samad Sarferaz, Heiner Mikosch and Andreas Dibiasi
Additional contact information
Armin Steinbach: HEC Paris; Max Planck Institute for Behavioral Economics
Samad Sarferaz: ETH Zurich
Heiner Mikosch: ETH Zürich - KOF Swiss Economic Institute
Andreas Dibiasi: Free University of Bozen-Bolzano
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
59 pages, November 13, 2025
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