Titelaufnahme

Estimated scal multipliers for the US are typically moderate, despite evidence for the Fed lowering, rather than raising, interest rates after government spending hikes. We rationalize these puzzling observations building on imperfect substitutability of assets. We document empirically that interest rates important for private borrowing/saving do not follow the response of the monetary policy rate, which is reected by rising liquidity premia after spending hikes. Amodel with a structural speci cation of asset liquidity can replicate these ndings and predicts moderate output e ects of scal expansions even when monetary policy rates fall or are xed at the zero lower bound.