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Understanding the effects of government spending on consumption

Jordi Gali (), David López Salido () and Javier Valles
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David López Salido: Banco de España

Authors registered in the RePEc Author Service: J. David Lopez-Salido ()

No 321, Working Papers from Banco de España, Working Papers Homepage

Abstract: Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.

Keywords: rule-of-thumb consumers; …scal multiplier; government spending; Taylor rules (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2003-12
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Citations: View citations in EconPapers (24) Track citations by RSS feed

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/03/Fic/dt0321e.pdf First version, January 2004 (application/pdf)

Related works:
Journal Article: Understanding the Effects of Government Spending on Consumption (2007) Downloads
Working Paper: Understanding the Effects of Government Spending on Consumption (2005) Downloads
Working Paper: Understanding the Effects of Government Spending on Consumption (2005) Downloads
Working Paper: Understanding the effects of government spending on consumption (2005) Downloads
Working Paper: Understanding the effects of government spending on consumption (2004) Downloads
Working Paper: Understanding the effects of government spending on consumption (2004) Downloads
Journal Article: Understanding the effects of government spending on consumption (2003) Downloads
Working Paper: Understanding the Effects of Government Spending on Consumption (2003) Downloads
Working Paper: Understanding the effects of government spending on consumption (2003) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0321

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