Realistic neoclassical multiplier

Zhen Huo and José-Víctor Ríos-Rull
Authors registered in the RePEc Author Service: José-Víctor Ríos-Rull

No 13-5, Economic Policy Paper from Federal Reserve Bank of Minneapolis

Abstract: Standard neoclassical models are unable to generate large values for the fiscal multiplier, the aggregate economic response to increased government spending. Empirical estimates place the multiplier between 0.7 and 1.0. Standard models deliver figures close to zero. In an earlier policy paper, we modified the standard model, with features of demand-based productivity. These modifications raised the figure to just 0.17, still very far from the range found in the empirical literature.

Date: 2013
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
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Citations: View citations in EconPapers (2)

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