Government Purchases and Real Interest Rates
AbstractThis paper examines the dynamic impact of government purchases in a simple general equilibrium model with both durable and non-durable consumer goods as well as productive capital. The model generates perhaps surprising results. In particular, increases in government purchases are shown to cause reductions in real interest rates. The model thus provides a possible explanation for the observed behavior of real interest rates around wars.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2624457.
Date of creation: 1987
Date of revision:
Publication status: Published in Journal of Political Economy
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