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Trend Growth and the Dynamic Effects of Government Spending

  • Mewael F. Tesfaselassie

The paper studies the macroeconomic effects of government spending shocks in an economy characterized by positive trend growth. It shows that the lower is the trend growth rate the less inflationary are government spending shocks and vice versa. Moreover, on impact output is higher but exhibits less persistence the lower is trend growth, an effect that also characterizes consumption and the fiscal multiplier given that consumption and labor are somewhat complementary

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File URL: https://www.ifw-members.ifw-kiel.de/publications/trend-growth-and-the-dynamic-effects-of-government-spending/kwp-1678.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1678.

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Length: 23 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:kie:kieliw:1678
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  18. Amano, Robert & Moran, Kevin & Murchison, Stephen & Rennison, Andrew, 2009. "Trend inflation, wage and price rigidities, and productivity growth," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 353-364, April.
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