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Government spending multipliers: New results from a model of naiveté

Yoonseok Choi ()

Economics Bulletin, 2019, vol. 39, issue 3, 2122-2128

Abstract: 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 naiveté. The main finding reveals that the model of naiveté delivers much larger present-value multipliers of output than a typical neoclassical model. Moreover, the model of naiveté 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; naiveté (search for similar items in EconPapers)
JEL-codes: E6 E3 (search for similar items in EconPapers)
Date: 2019-09-30
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