Multipliers and Capital: What is the role of Imperfect Competition?

Luis Costa

Discussion Papers from Department of Economics, University of York

Abstract: In static general equilibrium models considering imperfectly competitive goods markets, the effectiveness of fiscal policy to stir output is shown to be greater than in the walrasian case. However, labour is the only input in these models. Here, I develop a simple intertemporal model allowing us to study the steady-state role of optimal capital stock in the fiscal policy transmission mechanism. I demonstrate the results depend strongly on the set of parameter values chosen and on the output definition. Using plausible calibrations the multiplier is larger in the walrasian case for small initial government purchases, and smaller for intermediate values.

Keywords: Multiplier; Fiscal Policy; Imperfect Competition (search for similar items in EconPapers)
JEL-codes: D5 E0 E3 H6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-lab and nep-ltv
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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:99/14

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