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Title:Understanding the effects of government spending on consumption PDF Logo
Authors:Galí, Jordi
Vallés, Javier
Wolman, Alexander L.
Issue Date:2003
Series/Report no.:CFS Working Paper 2004/23
Abstract:Recent evidence on the effect of government spending shocks on consumption 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 (non-Ricardian) consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.
Subjects:Rule-of-Thumb Consumers
Fiscal Multiplier
Government Spending
Taylor Rules
JEL:E32
E62
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-10746
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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