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Multipliers and Capital: What is the role of Imperfect Competition?

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  • Luis F. Costa

Abstract

In static general equilibrium models considering imperfectly competitive goods markets, the effectiveness of fiscal policy to stir output is shown to be greater than in the walrasian case. However, labour is the only input in these models. Here, I develop a simple intertemporal model allowing us to study the steady-state role of optimal capital stock in the fiscal policy transmission mechanism. I demonstrate the results depend strongly on the set of parameter values chosen and on the output definition. Using plausible calibrations the multiplier is larger in the walrasian case for small initial government purchases, and smaller for intermediate values.

Suggested Citation

  • Luis F. Costa, "undated". "Multipliers and Capital: What is the role of Imperfect Competition?," Discussion Papers 99/14, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:99/14
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    References listed on IDEAS

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    More about this item

    Keywords

    Multiplier; Fiscal Policy; Imperfect Competition;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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