Gauging the effects of the German COVID-19 fiscal stimulus package.

ABSTRACT: We simulate the fiscal stimulus package set up by the German government to alleviate the costs of the COVID-19 pandemic in a dynamic New Keynesian multi-sector general equilibrium model. We find that, cumulated over 2020-2022, output losses relative to steady state can be reduced by more than 6 PP. On average, welfare costs of the pandemic can be mitigated by 11%, or even by 33% for liquidity-constrained households. The long-run present value multiplier of the package amounts to 0.5. Consumption tax cuts and transfers to households primarily stabilize private consumption, and subsidies prevent firm defaults. The most cost-effective measure is an increase in productivity-enhancing public investment. However, it only fully materializes in the medium to long-term. Relative to the respective p

SUBMITTER: Hinterlang N 

PROVIDER: S-EPMC10015777 | biostudies-literature | 2023 May

REPOSITORIES: biostudies-literature