Kiel Working Papers, Kiel Institute for World Economics
No 1678:
Trend Growth and the Dynamic Effects of Government Spending
Mewael F. Tesfaselassie
Abstract: 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
Keywords: trend growth, government spending, fiscal multiplier; (follow links to similar papers)
JEL-Codes: E21,; E62,; H31; (follow links to similar papers)
23 pages, January 2011
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