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The Intertemporal Keynesian Cross

Matthew Rognlie (), Ludwig Straub and Adrien Auclert ()

No 1587, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We derive a microfounded, dynamic version of the traditional Keynesian cross, which we call the intertemporal Keynesian cross. It characterizes the mapping from all partial equilibrium demand shocks to their general equilibrium outcomes. The aggregate demand feedbacks between periods can be interpreted as a network, and the linkages in the network can be generalized to reflect both the feedback from consumption and other dynamic forces, such as fiscal and monetary policy responses. We explore the general equilibrium amplification and propagation of impulses, and show how they vary with features of the economy. General equilibrium amplification is especially strong when agents are constrained, face uncertainty, or are unequally exposed to aggregate fluctuations, and it plays a crucial role in the transmission of monetary policy.

Date: 2017
New Economics Papers: this item is included in nep-dge and nep-pke
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Related works:
Working Paper: The Intertemporal Keynesian Cross (2018) Downloads
Working Paper: The Intertemporal Keynesian Cross (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1587

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