The Missing Intercept: A Demand Equivalence Approach / Christian K. Wolf.

Format:

Book

Author/Creator:

Wolf, Christian K.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29558.

NBER working paper series no. w29558

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium "missing intercept" of shocks to private spending identified in the cross section. I apply this method to deficit-financed stimulus checks, and find a) a large direct consumption spending response, and b) a fiscal multiplier of one and so a missing intercept close to zero. I also discuss the robustness of this aggregation approach to empirically plausible violations of demand equivalence.

Notes:

Print version record

December 2021.