Private and Public Consumption and Counter-Ciclical Fiscal Policy
AbstractThis paper bulds a closed-economy NK-DSGE model with no capital, in which consumers value both private and public consumption and fiscal policy is determined by a feedback rule responding to output gap. We analyse how different degrees of substitutatibility/complementarity between private and public consumption and a pro/counter-cyclical stance of fiscal policy affect equilbrium determinacy and the response of the economy to a wide range of shocks. Results show that determinacy is ensured by counter-cyclical fiscal policy under complementarity; increasing substitutability also pro-cyclical stance becomes stable. Differences can be observed also in response to shocks.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 588.
Date of creation: Apr 2007
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Other versions of this item:
- Marattin, Luigi, 2007. "Private and public consumption and counter-cyclical fiscal policy," MPRA Paper 9493, University Library of Munich, Germany, revised Dec 2007.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H40 - Public Economics - - Publicly Provided Goods - - - General
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-14 (All new papers)
- NEP-MAC-2007-08-14 (Macroeconomics)
- NEP-PBE-2007-08-14 (Public Economics)
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