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The Effect of the Recovery Act on Consumer Spending

Marianna Kudlyak, M. Saif Mehkari, Bill Dupor () and Marios Karabarbounis
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M. Saif Mehkari: University of Richmond
Marios Karabarbounis: Federal Reserve Bank of Richmond

No 707, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We analyze the effect of the spending component of the Recovery Act (2009-2012) on consumer spending, namely retail and auto purchases. We find a that a $1 increase in county-level government spending, increased county-level retail spending by $0.20, and auto spending by $0.05. We translate these regional estimates into aggregate effects using a novel quantitative model. We explicitly model several spillover channels through which government spending may spread across regions, such as trade in intermediate goods, a federal tax union, and a currency union. However, we also allow for heterogeneity and incomplete markets within each region. We simulate regional government spending shocks and analyze their effect on local consumer spending.

New Economics Papers: this item is included in nep-dge
Date: 2017
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More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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