Gitte Yding Salmansen

Ph.d.-forsvar: Gitte Yding Salmansen: Essays on Monetary and Fiscal Policy Interactions 

This dissertation consists of three self-contained chapters on monetary policy and fiscal policy. All three papers concern the effects of monetary and fiscal policy in the presence of financial frictions.  The first paper analyzes an economy, at with monetary policy at the zero lower bound, ie. in a liquidity trap. I introduce a persistence channel, in which the expected duration of the liquidity trap depends negatively on output. This persistence channel makes fiscal stimulus much more potent. In the second and third paper i consider limited asset market participation (LAMP) in a small open economy. I consider a positive technology shock and find the introduction of LAMP implies the negative response of hours is either halved or hardly affected, depending on the monetary policy. In the last paper I analyze fiscal policy and show that LAMP only has minor effects on the response of output to a government spending shock due to opposite movements in consumption and net exports.