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Fiscal stimulus with learning-by-doing

d’Alessandro, Antonello, Giulio Fella and Leonardo Melosi ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using a Bayesian SVAR analysis, we document that an increase in government purchases raises private consumption, the real wage and total factor productivity (TFP) while reducing inflation. Each of these facts is hard to reconcile with both neoclassical and New-Keynesian models. We extend a standard New-Keynesian model to allow for skill accumulation through past work experience, following Chang, Gomes and Schorfheide (2002). An increase in government spending increases hours and induces skill accumulation and higher measured TFP and real wages in subsequent periods. Future marginal costs fall lowering future expected inflation and, through the monetary policy rule, the real interest rate. Consumption increases as a result.

Keywords: fiscal policy transmission; consumption; real wage (search for similar items in EconPapers)
JEL-codes: E62 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018-05
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http://eprints.lse.ac.uk/90376/ Open access version. (application/pdf)

Related works:
Journal Article: FISCAL STIMULUS WITH LEARNING‐BY‐DOING (2019) Downloads
Working Paper: Fiscal Stimulus with Learning-By-Doing (2018) Downloads
Working Paper: Fiscal Stimulus with Learning-By-Doing (2018) Downloads
Working Paper: Fiscal Stimulus with Learning-By-Doing (2017) Downloads
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