Monetary Fiscal Regimes and Canada's Multiplier Effect

Abstract: I investigate the effects of debt-financed government on the Canadian economy using a dynamic stochastic general equilibrium model with Bayesian estimated parameters that are inferred from four macroeconomic time series. The focus of the analysis is on the differences in fiscal multipliers produced under two distinct monetary-fiscal policy regimes, before-and-after the Great Recession. To maximize the multiplier effects of Canadian government investments, my findings recommend a combination of moderate inflation-stabilizing monetary policy and lenient debt-stabilizing fiscal policy.