Does government spending crowd in private consumption?

theory and empirical evidence for the euro area

Does government spending crowd in private con ...
Günter Coenen, Günter Coenen
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Last edited by WorkBot
January 24, 2010 | History

Does government spending crowd in private consumption?

theory and empirical evidence for the euro area

In this paper, we revisit the effects of government spending shocks on private consumption within an estimated New-Keynesian DSGE model of the euro area featuring non-Ricardian households. Employing Bayesian inference methods, we show that the presence of non- Ricardian households is in general conducive to raising the level of consumption in response to government spending shocks when compared with the benchmark specification without non-Ricardian households. However, we find that there is only a fairly small chance that government spending shocks crowd in consumption, mainly because the estimated share of non-Ricardian households is relatively low, but also because of the large negative wealth effect induced by the highly persistent nature of government spending shocks.

Publish Date
Language
English
Pages
36

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Book Details


Edition Notes

"August 2005."

Includes bibliographical references (p. 35-36).

Also available on the World Wide Web.

Published in
Washington, D.C
Series
IMF working paper -- WP/05/159

The Physical Object

Pagination
36 p. :
Number of pages
36

Edition Identifiers

Open Library
OL19269055M

Work Identifiers

Work ID
OL12703713W

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