Output Effects of Government Purchases
AbstractBecause of a small direct negative effect on private spending, temporary variations in government purchases as in wartime, would have a strong positive effect on aggregate demand. Intertemporal substitution effects would direct work and production toward these periods where output was valued unusually highly. Defense purchases are divided empirically into "permanent" and "temporary" components by considering the role of (temporary) wars. Shifts in non-defense purchases are mostly permanent. Empirical results verify a strong expansionary effect on output of temporary purchases, but contradict some more specific expectational propositions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0432.
Date of creation: Jan 1980
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Publication status: published as Journal of Political Economy, Vol. 89, no. 6 (1981): 1086-121.
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