government sector and a share of credit-constrained households. We simulate permanent cuts in government consumption, government … investment, and transfer payments as well as permanent increases in the labor, capital and consumption tax rate. We find that … respect to welfare gains cuts in government consumption rank highest because they yield the largest increase in private …

It is shown empirically that, for the US economy, fiscal stimulus has increased total consumption, but has depressed … potential collapse into a Keynesian economic black hole. A theory of economic growth is proposed to explain how fiscal stimulus …

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 …

, it is shown that government expenditures can cause a rise in private consumption, real wages, and employment if the … to decline. Households are willing to raise consumption if monetary policy is active, i.e. ensures that the real interest … rate rises with inflation. Otherwise, private consumption can also be crowded-out, as in the conventional case where …