Understanding the effects of government spending on consumption

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dc.contributor	Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.contributor.author	Galí, Jordi, 1961-
dc.contributor.author	López-Salido, J. David
dc.contributor.author	Vallés, Javier
dc.date	2002-09-01
dc.identifier.citation	https://econ-papers.upf.edu/ca/paper.php?id=911
dc.identifier.uri	http://hdl.handle.net/10230/1002
dc.format	application/pdf
dc.language.iso	eng
dc.relation	Economics and Business Working Papers Series; 911
dc.rights	L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights	info:eu-repo/semantics/openAccess
dc.rights	http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject	rule-of-thumb consumers
dc.subject	non-ricardian households
dc.subject	fiscal multiplier
dc.subject	government spending
dc.subject	taylor rules
dc.subject	Macroeconomics and International Economics
dc.title	Understanding the effects of government spending on consumption
dc.type	info:eu-repo/semantics/workingPaper
dc.description.abstract	Recent evidence suggests that consumption rises in response to an increase in government spending. That finding cannot be easily reconciled with existing optimizing business cycle models. We extend the standard new Keynesian model to allow for the presence of rule-of-thumb consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending.