The Output Effects of (Non-Separable) Government Consumption at the Zero Lower Bound

João Valle e Azevedo
Authors registered in the RePEc Author Service: Valerio Ercolani

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: We investigate the reaction of output to government spending shocks at the zero lower bound (ZLB) on the nominal interest rate when government and private consumption are non-separable in preferences. In particular, substitutability between private and government consumption significantly reduces the otherwise large output multipliers obtained at the ZLB. Additionally, the coupling of substitutability with a debt-stabilizing fiscal rule can generate negative output multipliers on impact.

JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w201310

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