Understanding the Effects of Government Spending on Consumption

Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.

MoreLess

Year of publication:	2005-09
Authors:	Galí, Jordi ; López-Salido, J David ; Vallés Liberal, Javier
Institutions:	C.E.P.R. Discussion Papers
Subject:	fiscal multiplier \| government spending \| non-Ricardian households \| rule-of-thumb consumers \| Taylor rules

Online Resource

Check full text access |

More access options

Check Google Scholar

In German libraries (KVK)

I need help

More details

Extent:	application/pdf
Series:	CEPR Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Number 5212
Classification:	E32 - Business Fluctuations; Cycles ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005497708