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The Government in SNA-Compliant DSGE Models

Author

Listed:
  • de-Córdoba Gonzalo F.

    (Department of Economics, Universidad de Málaga and ESCP, Málaga, Spain)

  • Molinari Benedetto

    (Department of Economics, Universidad de Málaga and RCEA, Málaga, Spain)

  • Torres José L.

    (Department of Economics, Universidad de Málaga, Málaga, Spain)

Abstract

The government size in developed economies expanded remarkably after the Second World War. This growth shaped the role of the government as a key player in the economic activity and the aggregate dynamics of a country. However, the way in which the government is represented in DSGE models is often reductive, containing homogeneous public spending and a few distortionary taxes without clear counterparts in fiscal data. This paper shows how dynamic general equilibrium models can incorporate a detailed government sector as defined in the System of National Accounts (SNA). This government features six types of public expenditures (i.e. the government’s intermediate consumption, public wage bill, debt service, public investment, and transfers to households both in-kind and other-than-in-kind), and five distortionary taxes (i.e. consumption tax, capital and labor income taxes, corporate tax and social contributions).

Suggested Citation

  • de-Córdoba Gonzalo F. & Molinari Benedetto & Torres José L., 2022. "The Government in SNA-Compliant DSGE Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 613-642, June.
    • Handle: RePEc:bpj:bejmac:v:22:y:2022:i:2:p:613-642:n:1
    DOI: 10.1515/bejm-2020-0120
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    More about this item

    Keywords

    government; public sector; DSGE models; government spending; National Accounts; OECD data;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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