Does Fiscal Policy Matter? Blinder and Solow Revisited / Roger E.A. Farmer, Dmitry Plotnikov.

Format:

Book

Author/Creator:

Farmer, Roger E.A.

Contributor:

National Bureau of Economic Research.

Plotnikov, Dmitry.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16644.

NBER working paper series no. w16644

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper uses the old-Keynesian representative agent model developed in Farmer (2010b) to answer two questions: 1) do increased government purchases crowd out private consumption? 2) do increased government purchases reduce unemployment? Farmer compared permanent tax financed expenditure paths and showed that the answer to 1) was yes and the answer to 2) was no. We generalize his result to temporary bond-financed paths of government purchases that are similar to the actual path that occurred during WWII. We find that a temporary increase in government purchases does crowd out private consumption expenditure as in Farmer (2010b). However, in contrast to Farmer's experiment we find that a temporary increase in government purchases can also reduce unemployment.

Notes:

Print version record

December 2010.