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The Keynesian multiplier and the Pigou effect under substitution between private and public consumption

  • Luis Carlos Corchón

    ()

    (Universidad Carlos III)

In this paper we present a fixprice model in which private and public consumption show some degree of substitution. We offer formulae for the Keynesian multiplier which depend on this degree of substitution. We also show that there is a Pigou effect and that, sometimes, this effect is larger than the Keynesian multiplier.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I1-P77.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 1 ()
Pages: 829-836

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Handle: RePEc:ebl:ecbull:eb-09-00551
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  1. Benassy, Jean-Pascal, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 503-23, October.
  2. Benassy, Jean-Pascal, 2007. "Ricardian equivalence and the intertemporal Keynesian multiplier," Economics Letters, Elsevier, vol. 94(1), pages 118-123, January.
  3. Barro, Robert J., 1981. "Output Effects of Government Purchases," Scholarly Articles 3451294, Harvard University Department of Economics.
  4. Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June.
  5. Linnemann, Ludger & Schabert, Andreas, 2004. "Can fiscal spending stimulate private consumption?," Economics Letters, Elsevier, vol. 82(2), pages 173-179, February.
  6. Heijdra, Ben J & Ligthart, Jenny E & van der Ploeg, Frederick, 1998. "Fiscal Policy, Distortionary Taxation, and Direct Crowding Out under Monopolistic Competition," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 79-88, January.
  7. Silvestre, Joaquim, 1982. "Fixprice analysis in exchange economies," Journal of Economic Theory, Elsevier, vol. 26(1), pages 28-58, February.
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