The Intertemporal Keynesian Cross

Adrien Auclert, Matthew Rognlie and Ludwig Straub

No 25020, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We generalize the traditional, static Keynesian cross by deriving an intertemporal Keynesian cross for the dynamic output response to government spending and taxes in microfounded general equilibrium models. Intertemporal marginal propensities to consume (iMPCs) are sufficient statistics for this response, with fiscal multipliers depending only on the interaction between iMPCs and public deficits. We provide empirical estimates of iMPCs and argue that they are inconsistent with representative- agent or two-agent models, but can be matched by certain heterogeneous-agent models. Models that match empirical iMPCs imply larger and more persistent output responses to deficit-financed fiscal policy, with cumulative spending multipliers above one.

JEL-codes: D1 E21 E22 E23 E32 E62 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pke
Note: EFG ME
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Citations: View citations in EconPapers (119)

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Related works:
Journal Article: The Intertemporal Keynesian Cross (2024)
Working Paper: The Intertemporal Keynesian Cross (2018)
Working Paper: The Intertemporal Keynesian Cross (2017)
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