Closed Form of Fiscal Multipliers in a DSGE model with Liquidity-Constrained households

Kenichi Tamegawa ()
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Kenichi Tamegawa: Meiji University

Economics Bulletin, 2012, vol. 32, issue 4, 3148-3157

Abstract: In this paper, we obtain the closed form of fiscal multipliers in a dynamic stochastic general equilibrium model with liquidity-constrained households. The closed form indicates that the first-period multiplier depends monotonically on the fraction of liquidity-constrained households over all the households. When this fraction is one, the maximum value of the multiplier is obtained as the inverse of one minus the labor share. This result indicates that our model has the traditional Keynesian fiscal multiplier (the inverse of one minus the marginal propensity to consume) as a special case.

Keywords: fiscal policy; fiscal multipliers; DSGE modeling; liquidity constraint (search for similar items in EconPapers)
JEL-codes: E2 E6 (search for similar items in EconPapers)
Date: 2012-11-19
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