Government spending multipliers: New results from a model of naivetÃ©
Yoonseok Choi ()
Economics Bulletin, 2019, vol. 39, issue 3, 2122-2128
The aim of this paper is to explore dynamic impacts of a government spending shock on key macro-aggregates by developing a neoclassical model of naivetÃ©. The main finding reveals that the model of naivetÃ© delivers much larger present-value multipliers of output than a typical neoclassical model. Moreover, the model of naivetÃ© can resolve the consumption puzzle of government spending by producing the crowding-in effect on consumption. Dynamic responses and multiplier effects of other variables are also discussed.
Keywords: Government spending; present-value multipliers; hyperbolic discounting; naivetÃ© (search for similar items in EconPapers)
JEL-codes: E6 E3 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-19-00594
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