Fiscal Shocks and Real Rigidities
AbstractIn this paper we show that results on the effects of fiscal shocks in Galí, López-Salido and Vallés (2007) rely on a high degree of price stickiness and a large percentage of financially constrained agents. Real rigidities in the form of habit persistence, fixed firm-specific capital and Kimball demand curves interact in interesting ways with nominal and financial rigidities and allow us to reproduce the same consumption multiplier as Galí et al. (2007) under only two and a half quarters of price stickiness, instead of four, and only 30 per cent of constrained agents instead of 50 per cent. Therefore, real rigidities are useful in the study of fiscal shocks in addition to monetary and productivity shocks as has been shown in the previous literature, though rule-of-thumb consumption remains too crude a mechanism for accounting for the hump-shaped response of consumption found in the data.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 9 (2009)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.degruyter.com
Other versions of this item:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Richard McManus, 2013. "Austerity versus Stimulus: A DSGE Political Economy Explanation," Discussion Papers 13/09, Department of Economics, University of York.
- Kaszab, Lorant, 2012. "Rule-of-Thumb Consumers and Labor Tax Cut Policy in the Zero Lower Bound," Cardiff Economics Working Papers E2012/13, Cardiff University, Cardiff Business School, Economics Section, revised Apr 2013.
- Kriwoluzky, Alexander, 2012.
"Pre-announcement and timing: The effects of a government expenditure shock,"
European Economic Review,
Elsevier, vol. 56(3), pages 373-388.
- Alexander Kriwoluzky, 2009. "Pre-announcement and Timing - The Effects of a Government Expenditure Shock," Economics Working Papers ECO2009/40, European University Institute.
- Francesco Furlanetto & Martin Seneca, 2012.
"Rule-of-Thumb Consumers, Productivity, and Hours,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 114(2), pages 658-679, 06.
- Francesco FURLANETTO, 2007. "Fiscal Shocks and the Consumption Response when Wages are Sticky," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 07.11, Université de Lausanne, Faculté des HEC, DEEP.
- Furlanetto, Francesco, 2011. "Fiscal stimulus and the role of wage rigidity," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 512-527, April.
- Richard McManus, 2013. ""We're all in this together"? A DSGE interpretation," Discussion Papers 13/08, Department of Economics, University of York.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.