 Sectoral Heterogeneity, Production Networks, and the Effects of Government SpendingHafedh Bouakez, Omar Rachedi and Emiliano Santoro Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ Abstract: We study the effects of government spending shocks in an economy with multiple interconnected production sectors that differ in their price rigidity, factor intensities, use of intermediate inputs, and contribution to final demand. The cumulative aggregate output multiplier associated with an aggregate government spending shock is 84% larger than that obtained in the average one-sector economy. This amplification is mainly driven by sectoral heterogeneity in price rigidity and the presence of input-output linkages. We also document substantial heterogeneity in the aggregate effects of sector-specific government spending shocks, and identify the key factors that account for it. Government spending shocks tend to have larger effects on aggregate output when they originate in sectors that have relatively rigid prices and high labor shares in value added, and are located downstream in the production network. Keywords: government spending multiplier; input-output matrix; price rigidity; spillover effects (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:17-2018 Access Statistics for this paper More papers in Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.