The Missing Intercept: A Demand Equivalence Approach

Christian Wolf

No 29558, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium "missing intercept" of shocks to private spending identified in the cross section. I apply this method to deficit-financed stimulus checks, and find a) a large direct consumption spending response, and b) a fiscal multiplier of one and so a missing intercept close to zero. I also discuss the robustness of this aggregation approach to empirically plausible violations of demand equivalence.

JEL-codes: E20 E32 E62 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-mac
Note: EFG ME
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published as Christian K. Wolf, 2023. "The Missing Intercept: A Demand Equivalence Approach," American Economic Review, vol 113(8), pages 2232-2269.

Downloads: (external link)
http://www.nber.org/papers/w29558.pdf (application/pdf)

Related works:
Journal Article: The Missing Intercept: A Demand Equivalence Approach (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:29558

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29558

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().