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Understanding the Effects of Government Spending on Consumption

Author(s) : Galí, Jordi , López-Salido, J. David , Vallés, Javier
Description : Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the...
Repository : e-Repositori UPF , View repository documents
Language(s) : English
Subject(s) : Rule-of-thumb consumers, non-Ricardian households, fiscal multiplier, government spending, Taylor rules
Publisher(s) :
Contributor(s) : Universitat Pompeu Fabra. Departament d'Economia i Empresa
Source(s) :
Publication Date(s) : 2012-07-11