Persistent government spending and fiscal multipliers: The investment-channel

Martial Dupaigne and Patrick Fève

European Economic Review, 2016, vol. 89, issue C, 425-453

Abstract: This paper inspects the mechanism shaping government spending multipliers in various small-scale DSGE setups with endogenous labor supply and capital accumulation. We analytically characterize the short-run investment multiplier, which in equilibrium can be either positive or negative. The investment multiplier increases with the persistence of the exogenous government spending process. The response of investment to government spending shocks strongly affects short-run multipliers on output and consumption.

Keywords: Government Spending Multipliers; DSGE models; Capital Accumulation; Labor Supply; Market Imperfections (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (15)

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Working Paper: Persistent Government Spending and Fiscal Multipliers: the Investment-Channel (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:89:y:2016:i:c:p:425-453

DOI: 10.1016/j.euroecorev.2016.09.004

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