Matthias Meier, University of Mannheim

"Systematic Monetary Policy and the Effects of Government Spending"

Abstract

We propose an identification design for the effects of systematic monetary policy which is based on (i) a narrative account of the FOMC members' policy preferences, and (ii) a novel instrument that exploits the FOMC's mechanical rotation of voting rights. Using our identification design, we estimate the causal effects of systematic monetary policy for the transmission of government spending shocks. We find that the fiscal spending multiplier is significantly above one when the FOMC is dovish, whereas the multiplier can be negative under a hawkish FOMC.

Joint with Lukas Hack and Klodiana Istrefi.

Contact person: Jeppe Druedahl