We study the empirical effects of fiscal policy in Denmark since the adoption of a fixed exchange rate policy in 1982. We demonstrate that fiscal stimulus has a rather large impact on economic activity in the very short run, with a government spending multiplier of 1.3 on impact in our preferred...

It is often claimed that the presence of liquidity constrained households enhances the need for and the effects of fiscal stabilization policies. This paper studies this in a model of a small open economy with liquidity constrained households. The results show that the consequences of liquidity...

We study the empirical effects of fiscal policy in Denmark since the adoption of a fixed exchange rate policy in 1982. Denmark’s fixed exchange rate implies that the nominal interest rate remains fixed after a fiscal expansion, facilitating a substantial impact of the fiscal stimulus on the...