We measure the size of the fiscal multiplier using a heterogeneous-agent model with incomplete markets, capital and ….We find that market incompleteness is key to determining the size of the fiscal multiplier, which is uniquely determined in … our model for any combination of fiscal and monetary policies of interest. The multiplier is 1.34 if deficit-financed and …

substitution effects, yielding uniform comparisons across models. By constraining the multiplier to tight ranges, model and prior …

falls significantly in response to an increase in government spending. These results imply that the average GDP multiplier … lies below unity. In order to determine whether concurrent increases in tax rates dampen the spending multiplier, I use two … spending multiplier. In the second part of the paper, I explore the effects of government spending on labor markets. I find …

output multiplier whereas it can produce a realistic unemployment multiplier but only under a special parameterization …