Program > Papers by author > Rannenberg Ansgar

I examine the effect of fiscal policy at the zero lower bound if households have preferences over safe assets (POSA) calibrated consistent with evidence on household savings behavior and individual discount rates, and estimates of the effect of the supply of US government debt on government bond yields. POSA loosens the link between household consumption and permanent-income and imply a wealth effect from government bonds. Therefore the multiplier of a permanent expenditure change increases and approaches the multiplier of an expenditure change limited to the ZLB period. This result strengthens with credit constrained households and firms.