Understanding the effects of government spending on consumption

Jordi Galí, David López Salido () and Javier Valles
Additional contact information
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

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
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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

Related works:
Working Paper: Understanding the Effects of Government Spending on Consumption (2015)
Journal Article: Understanding the Effects of Government Spending on Consumption (2007)
Working Paper: Understanding the Effects of Government Spending on Consumption (2005)
Working Paper: Understanding the Effects of Government Spending on Consumption (2005)
Working Paper: Understanding the effects of government spending on consumption (2005)
Working Paper: Understanding the effects of government spending on consumption (2004)
Working Paper: Understanding the effects of government spending on consumption (2004)
Journal Article: Understanding the effects of government spending on consumption (2003)
Working Paper: Understanding the effects of government spending on consumption (2003)
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:bde:wpaper:0321

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().