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Fiscal Stimulus with Learning-By-Doing

Giulio Fella, Leonardo Melosi () and Antonello dAlessandro
Authors registered in the RePEc Author Service: Simone D'Alessandro ()

No WP-2018-9, Working Paper Series from Federal Reserve Bank of Chicago

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: consumption; Fiscal policy transmission; real wage (search for similar items in EconPapers)
JEL-codes: E63 E62 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2018-05-01, Revised 2018-05-01
New Economics Papers: this item is included in nep-mac
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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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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:wp-2018-09

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DOI: 10.21033/wp-2018-09

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