EconPapers    
Economics at your fingertips  
 

Simple Analytics of the Government Expenditure Multiplier

Michael Woodford ()

American Economic Journal: Macroeconomics, 2011, vol. 3, issue 1, 1-35

Abstract: This paper explains the key factors that determine the output multiplier of government purchases in New Keynesian models, through a series of simple examples that can be solved analytically. Sticky prices or wages allow for larger multipliers than in a neoclassical model, though the size of the multiplier depends crucially on the monetary policy response. A multiplier well in excess of one is possible when monetary policy is constrained by the zero lower bound, and in this case welfare increases if government purchases expand to partially fill the output gap that arises from the inability to lower interest rates. (JEL E12, E23, E32, E62, H20, H50)

JEL-codes: E12 E23 E32 E62 H20 H50 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mac.3.1.1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (392) Track citations by RSS feed

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.1.1 (application/pdf)

Related works:
Working Paper: Simple Analytics of the Government Expenditure Multiplier (2010) Downloads
Working Paper: Simple Analytics of the Government Expenditure Multiplier (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:3:y:2011:i:1:p:1-35

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2021-06-15
Handle: RePEc:aea:aejmac:v:3:y:2011:i:1:p:1-35