Multipliers and Imperfect Competition: What is the role of Capital Depreciation

Luis Costa

No 2000/03, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: In static general equilibrium models considering imperfectly competitive goods markets, the effectiveness of fiscal policy to stir output is shown to be greater than in the walrasian case. However, labour is the only input in these models. Here, 1 develop a simple intertemporal model allowing us to study the steady-state role of optimal capital stock in the fiscal policy transmission mechanism. 1 demonstrate the results depend strongly on the set of parameter values chosen and on the output definition. Using plausible numerical values the multiplier is larger in the walrasian case for small initial government purchases, and smaller for intermediate values.

Keywords: Multiplier; Fiscal Policy; Imperfect Competition (search for similar items in EconPapers)
JEL-codes: D5 E0 E3 H6 (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-dge and nep-ind
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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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