Reconciling Output and Unemployment Fiscal Multipliers

Tae Bong Kim

Global Economic Review, 2019, vol. 48, issue 4, 378-395

Abstract: This paper provides a macroeconomic model that can simultaneously explain output and unemployment multipliers which are consistent with empirical evidence. To this end, this paper has merged and investigated a model with deep habit formation in private and public consumptions and a model with a labour market friction that generates involuntary unemployment stemming from the monopolistic power of differentiated labour services. The model with a baseline calibration seems to produce quantitatively plausible responses of key macroeconomic variables in response to a government expenditure shock.

Date: 2019
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DOI: 10.1080/1226508X.2019.1605922

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