The consumption path associated with the life-cycle-optimising version of the permanent- income model is commonly agreed to be a random walk with drift. The persisting failure of the latter to conform to data could, however, raise questions about the suitability of the life-...

In this paper we construct a stylised general equilibrium macromodel to show that demand led expansions may have unexpected effects when market imperfections lead to changes in labour productivity. We find some empirical support, from a number of European countries, for the main predictions of...

We provide empirical evidence from a number of European countries, which shows that unemployment and output are positively related when unemployment is low and inversely related when unemployment is high. We then construct a stylised macro-model with goods and labour market imperfections to show...

This paper develops a generalised version of the life-cycle model in which consumers’ preferences are defined over components of consumption and are affected by the level of public expenditure on goods and services. The model implies that the crowding out of private consumption could in fact...