This paper explores the implications of economic and political inequality for the comovement of government purchases … value government purchases which are financed by income taxes. A key feature of the model is a wealth bias in the political … to generate weaker positive comovement of government purchases than models with no political wealth bias. The wealth bias …

form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government … purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp …

Recent empirical research documents that an exogenous rise in government purchases in a given country triggers a … for the empirical real exchange rate response. When faced with a country-specific rise in government purchases, local …. In a bonds-only economy, an increase in government purchases triggers a real exchange rate depreciation, if the rise in …