Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152947
Authors: 
Coenen, Günter
Straub, Roland
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 513
Abstract: 
In this paper, we revisit the effects of government spending shocks on private consumption within an estimated New-Keynesian DSGE model of the euro area featuring non-Ricardian households. Employing Bayesian inference methods, we show that the presence of non-Ricardian households is in general conducive to raising the level of consumption in response to government spending shocks when compared with the benchmark specification without non-Ricardian households. However, we find that there is only a fairly small chance that government spending shocks crowd in consumption, mainly because the estimated share of non-Ricardian households is relatively low, but also due to the large negative wealth effect induced by the highly persistent nature of government spending shocks.
Subjects: 
DSGE modelling
euro area
Fiscal Policy
non-Ricardian households
JEL: 
E32
E62
Document Type: 
Working Paper

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