A Fiscal Stimulus and Jobless Recovery

Cristiano Cantore, Paul Levine () and Giovanni Melina

No 2013/017, IMF Working Papers from International Monetary Fund

Abstract: We analyse the effects of a government spending expansion in a DSGE model with Mortensen-Pissarides labour market frictions, deep habits in private and public consumption, investment adjustment costs, a constant-elasticity-of-substitution (CES) production function, and adjustments in employment both at the intensive as well as the extensive margin. The combination of deep habits and CES technology is crucial. The presence of deep habits magnifies the responses of macroeconomic variables to a fiscal stimulus, while an elasticity of substitution between capital and labour in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery.

Keywords: WP; government spending; fiscal policy; deep habits; labor market search-match frictions; unemployment; CES production function; government spending expansion; jobless recovery; unemployment multiplier; CES technology; depreciation rate; Fiscal stimulus; Consumption (search for similar items in EconPapers)
Pages: 53
Date: 2013-01-18
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: A Fiscal Stimulus and Jobless Recovery (2014)
Working Paper: A Fiscal Stimulus and Jobless Recovery (2011)
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