Household heterogeneity and the value of government spending multiplier

Paweł Kopiec ()

No 321, NBP Working Papers from Narodowy Bank Polski

Abstract: This paper provides an analytical decomposition of the fiscal multiplier in economy populated with heterogeneous households, uninsured idiosyncratic income risk and frictional product market. Similarly to Auclert (2019), the derived expression consists of interpretable, model-based channels that describe the transmission of government spending shocks by private consumption. Calibrated model is used to estimate the magnitude of multipliers and their structure under alternative fiscal and monetary rules. Analytical and quantitative comparison to the multiplier’s formula in economy with identical agents indicates that household heterogeneity plays a crucial role in the propagation of fiscal expenditures shocks.

Keywords: Heterogeneous Agents; Fiscal Stimulus (search for similar items in EconPapers)
JEL-codes: D30 E62 H23 H30 H31 (search for similar items in EconPapers)
Pages: 68
Date: 2019
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:321

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