Vimercati, Riccardo Bianchi; Eichenbaum, Martin S.; … - National Bureau of Economic Research - 2021
We address the question of how sensitive is the power of fiscal policy in the ZLB to the assumption of rational expectations. We do so through the lens of a standard NK model in which people are level-k thinkers. Our analysis weakens the case for using government spending to stabilize the...