We study the impact of a government spending shock on the distribution of income and wealth between cohorts in a dynamic stochastic Overlapping Generations model with two types of households, Ricardian households and rule-of-thumb consumers. We demonstrate that an unexpected increase in...

Using a structural VAR analysis, we document that an increase in government purchases raises private consumption, total factor productivity (TFP) and the real wage. This poses a puzzle for both neoclassical and New-Keynesian models. We extend a standard New-Keynesian model to allow for skill...

Using a Bayesian SVAR analysis, we document that an increase in government purchases raises private consumption, the real wage and total factor productivity (TFP) while reducing inflation. Each of these facts is hard to reconcile with both neoclassical and New-Keynesian models. We extend a...