Understanding the effects of government spending on consumption

Jordi Galí, David Lopez-Salido and Javier Valles

No 805, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

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: Consumption (Economics); Government spending policy (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.federalreserve.gov/pubs/ifdp/2004/805/default.htm (text/html)
http://www.federalreserve.gov/pubs/ifdp/2004/805/ifdp805.pdf (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)
Journal Article: Understanding the effects of government spending on consumption (2003)
Working Paper: 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:fip:fedgif:805

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().