Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209901
Authors: 
Furlanetto, Francesco
Seneca, Martin
Year of Publication: 
2008
Series/Report no.: 
Working Paper 2008/10
Abstract: 
In this paper we show that empirically plausible results on the effects of fiscal shocks in Galí, López-Salido and Vallés (2007) rely on a high degree of price stickiness and a large percentage of financially constrained agents. Real rigidities in the form of habit persistence, fixed firm-specific capital and Kimball demand curves interact in interesting ways with nominal and financial rigidities and allow us to reproduce the same consumption multiplier as Galí et al. (2007) under only two and a half quarters of price stickiness, instead of four, and only 30 per cent of constrained agents instead of 50 percent. Therefore, real rigidities are useful in the study of fiscal shocks in addition to monetary and productivity shocks as has been shown in the previous literature.
Subjects: 
Kimball demand curves
rule-of-thumb consumers
fiscal shocks
nominal rigidities
real rigidities
firm-specific capital
habit persistence
JEL: 
E32
E62
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-444-4
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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