Using VAR analysis on US data, we show that unanticipated fiscal expansions boost private consumption and business … crowding-in of both consumption and entry can be generated only under very specific assumptions. In a static model with full … such that future profits are high enough to generate entry. However, consumption falls for conventional parameter values …

multiplier effect), it quickly rises above pre-shock levels. The rebound in investment is facilitated by fiscal space, flexible … investment’s response—compared to public investment adjustments, reductions in public consumption lead to larger private …