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Government spending multipliers: New results from a model of naiveté

Author

Listed:
  • Yoonseok Choi

    (Chonnam National University)

Abstract

The aim of this paper is to explore dynamic impacts of a government spending shock on key macro-aggregates by developing a neoclassical model of naiveté. The main finding reveals that the model of naiveté delivers much larger present-value multipliers of output than a typical neoclassical model. Moreover, the model of naiveté can resolve the consumption puzzle of government spending by producing the crowding-in effect on consumption. Dynamic responses and multiplier effects of other variables are also discussed.

Suggested Citation

  • Yoonseok Choi, 2019. "Government spending multipliers: New results from a model of naiveté," Economics Bulletin, AccessEcon, vol. 39(3), pages 2122-2128.
    • Handle: RePEc:ebl:ecbull:eb-19-00594
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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I3-P198.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Choi, Yoonseok & Kim, Sunghyun Henry, 2021. "Understanding the effects of government spending in a time-inconsistent model," Economic Modelling, Elsevier, vol. 98(C), pages 266-279.

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    More about this item

    Keywords

    Government spending; present-value multipliers; hyperbolic discounting; naiveté;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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