A Fiscal Stimulus and Jobless Recovery / Cristiano Cantore, Paul Levine, Giovanni Melina.

Format:

Book

Government document

Author/Creator:

Cantore, Cristiano.

Contributor:

Levine, Paul.

Melina, Giovanni.

International Monetary Fund.

Series:

IMF Working Papers; Working Paper ; No. 2013/017

IMF Working Papers

Language:

English

Subjects (All):

Fiscal policy--Econometric models.

Fiscal policy.

Labor--Econometric models.

Labor.

Unemployment--Econometric models.

Unemployment.

Physical Description:

1 online resource (54 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2013.

Language Note:

English

Summary:

We analyse the effects of a government spending expansion in a DSGE model with Mortensen-Pissarides labour market frictions, deep habits in private and public consumption, investment adjustment costs, a constant-elasticity-of-substitution (CES) production function, and adjustments in employment both at the intensive as well as the extensive margin. The combination of deep habits and CES technology is crucial. The presence of deep habits magnifies the responses of macroeconomic variables to a fiscal stimulus, while an elasticity of substitution between capital and labour in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery.

Contents:

Cover; Contents; I. Introduction; Figures; 1 A Jobless Recovery; II. Selected Literature; A. Empirical Literature; B. Theoretical Literature; C. Jobless Recovery; III. The Model; A. Search-Match Technology; B. Households; C. Government; D. Firms; E. Wage Bargaining and Hours Worked; F. Equilibrium; G. CES Production Function and "Re-Parametrization"; H. Additional Functional Forms; IV. Parameter Choice; Tables; Table 1 Baseline Calibration; V. Results; A. Neoclassical Benchmark with Search-Match Frictions

2 A Government Spending Expansion (1% of Output, Lump-Sum Taxes, Balanced Budget) in an RBC model Augmented with Mortensen-Pissarides Matching Frictions: The Effects of Deep Habits in ConsumptionB. Deep Habits; C. CES Production Function; 3 Sensitivity of the Results to Different Values of the Elasticity of Substitution Between Capital and Labor; D. Jobless Recovery; 4 Peak Elasticity of the Unemployment Rate to Real Output Changes in Response to a Government Spending Expansion at Different Levels of the Elasticity of Substitution Between Capital and Labor; 5 A Fiscal Stimulus in a Recession

VI. Concluding RemarksReferences; Appendix; A: Business Cycle Statistics; Table A.1 Business Cycle Properties of Selected Macroeconomic Series; B: Sensitivity Exercises; A. Bargaining Power; B.1 Sensitivity of Output and Unemployment Multipliers to Changes in the Firms' Bargaining Power; B. Hagedorn and Manovskii Effect; B.2 Sensitivity of Output and Unemployment Multipliers to Changes in the Magnitude of the Replacement Ratio; C. Quantitative Implications of the Choice of the Replacement Ratio and the Bargaining Power; Table B.1 The Impact of the Fiscal Stimulus in Different Scenarios

D. Sensitivity to Investment Adjustment Costs and the Elasticity of Substitution Between Leisure and ConsumptionE. Debt-Financed Fiscal Policy and Distortionary Taxation; F. Sensitivity to Tax Persistence and the Tax Responsiveness to Government Debt; Table B.2 The Impact of the Fiscal Stimulus in Different Scenarios; C. The Fiscal Stimulus in a NK Extension of the Model; B.3 Sensitivity of Output and Unemployment Multipliers to the Introduction of Distortionary Taxation and Government debt; A. Introducing Sticky Prices

B.4 Sensitivity of Output and Unemployment Multipliers to Changes in the Persistence of Tax InstrumentsB.5 Sensitivity of Output and Unemployment Multipliers to Changes in the Tax Responsiveness to Government Debt; B. Results; C.1 A Government Spending Expansion (1% of Output, Lump-Sum Taxes, Balanced Budget) in a Model Augmented with Mortensen-Pissarides Matching, Deep Habits and a CES Production Function: Flexible Vs. Sticky Prices; C.2 Sensitivity of Impact Responses to the Deep Habit Parameter and the Monetary Response to the Output Gap; D. Symmetric Equilibrium; E. Steady State

Notes:

"January 2013."

Includes bibliographical references.

Description based on print version record.

ISBN:

9781475587555

1475587554

9781475595895

1475595891

9781299264526

1299264522

9781475537000

147553700X