Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234223 
Year of Publication: 
2021
Series/Report no.: 
Kiel Working Paper No. 2184
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
We analyze the effects of government spending in a New-Keynesian model with search and matching frictions featuring endogenous growth through learning-by-doing and skill loss from long-term unemployment. We show that medium-run and long-run output and unemployment multipliers are much larger compared to the standard model that abstracts from endogenous growth and skill loss. In our model the aggregate effect of a temporary fiscal stimulus is amplified via the skill loss channel through lower training costs. Via the learning-by-doing channel, it leads to hysteresis in human capital accumulation and thereby output. These results hold for alternative forms of fiscal financing (lump-sum tax, distortionary tax and government debt) as well as alternative labor market institutions (US and Europe).
Subjects: 
Sovereign default
debt restructuring
international financial architecture
creditor Coordination
JEL: 
E24
E52
Document Type: 
Working Paper

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