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Fiscal Policy And the Nominal Term Premium

Author

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  • ROMAN HORVATH
  • LORANT KASZAB
  • ALES MARSAL
Abstract
We estimate a New Keynesian model on postwar U.S. data with the generalized method of moments using either constant or time‐varying debt and distortionary labor income taxes. We show that accounting for government debt and distortionary taxes help the New Keynesian model match the level of the nominal term premium with a lower relative risk‐aversion than typically found in the literature.

Suggested Citation

  • Roman Horvath & Lorant Kaszab & Ales Marsal, 2022. "Fiscal Policy And the Nominal Term Premium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(2-3), pages 663-683, March.
    • Handle: RePEc:wly:jmoncb:v:54:y:2022:i:2-3:p:663-683
    DOI: 10.1111/jmcb.12858
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    Cited by:

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    3. Roman Horvath & Lorant Kaszab & Ales Marsal, 2022. "Interest rate rules and inflation risks in a macro‐finance model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(4), pages 416-440, September.
    4. Ales Marsal & Katrin Rabitsch & Lorant Kaszab, 2023. "From Linear to Nonlinear: Rethinking Inflation Dynamics in the Calvo Pricing Mechanism," Department of Economics Working Papers wuwp350, Vienna University of Economics and Business, Department of Economics.

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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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