Disaggregated approach to government spending shocks: a theoretical analysis

Orcan Çörtük and Mustafa Haluk Guler

Journal of Economic Policy Reform, 2015, vol. 18, issue 4, 267-292

Abstract: We calibrate a dynamic stochastic general equilibrium model that features a transmission mechanism with different types of government spending, while the literature usually treats government spending as a homogenous compound. In this regard, we manage to distinguish between different types of government spending (namely: government investment, government wage component consumption and non-wage component consumption) where each type of spending has a varied role in the economy. The government wage increase has the largest positive effect both on private consumption and output by affecting the economy through the government production. This is a natural consequence of government production being complementary to private consumption in our model. Other two government spending types, namely government non-wage consumption and government investment, also have positive effects on output, whereas their responses on (private) consumption are mostly negative. These results provide an alternative explanation for the wide range of multipliers existing in the literature as our setup enables them to produce different effects on macroeconomic variables.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/17487870.2014.951046 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: A disaggregated approach to the government spending shocks: an theoretical analysis (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jecprf:v:18:y:2015:i:4:p:267-292

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/GPRE20

DOI: 10.1080/17487870.2014.951046

Access Statistics for this article

Journal of Economic Policy Reform is currently edited by Dr Judith Clifton

More articles in Journal of Economic Policy Reform from Taylor and Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().