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  3. American Economic Review
  4. May 2012
  5. Fiscal Policy in a Financial Crisis: Standard Policy versus Bank Rescue Measures

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Fiscal Policy in a Financial Crisis: Standard Policy versus Bank Rescue Measures

  • Robert Kollmann
  • Werner Roeger
  • Jan in't Veld
American Economic Review
vol. 102, no. 3, May 2012
(pp. 77–81)
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Abstract

A key dimension of fiscal policy during the financial crisis was massive government support for the banking system. The macroeconomic effects of that support have, so far, received little attention in the literature. This paper fills this gap, using a quantitative dynamic model with a banking sector. Our results suggest that state aid for banks may have a strong positive effect on real activity. Bank state aid multipliers are in the same range as conventional fiscal spending multipliers. Support for banks has a positive effect on investment, while a rise in government purchases crowds out investment.

Citation

Kollmann, Robert, Werner Roeger, and Jan in't Veld. 2012. "Fiscal Policy in a Financial Crisis: Standard Policy versus Bank Rescue Measures." American Economic Review, 102 (3): 77–81. DOI: 10.1257/aer.102.3.77

JEL Classification

  • E44 Financial Markets and the Macroeconomy
  • E62 Fiscal Policy
  • E32 Business Fluctuations; Cycles
  • F44 International Business Cycles
  • G01 Financial Crises