Arbeitspapier
Government Spending Shocks and Rule-Of-Thumb Consumers: The Role of Steady State Inequality
Galí, López-Salido, and Vallés (2007) suggest that because part of the population follow a rule-of-thumb by which they spend their entire disposable income each period, private consumption responds positively to deficit-financed increases in government spending. Key to this result is a centralized labor market. I show that the ability to explain the positive consumption response as a consequence of rule-of-thumb behavior hinges on the arbitrary assumption that wealth is redistributed across households in steady state. Inequality leads to equilibrium indeterminacy and undermines the theoretical foundation of the centralized labor market.
- ISBN
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978-82-7553-564-9
- Sprache
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Englisch
- Erschienen in
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Series: Working Paper ; No. 2010/14
- Klassifikation
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Wirtschaft
Business Fluctuations; Cycles
Fiscal Policy
- Thema
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rule-of-thumb consumers
wealth inequality
government spending
indeterminacy
- Ereignis
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Geistige Schöpfung
- (wer)
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Natvik, Gisle James
- Ereignis
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Veröffentlichung
- (wer)
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Norges Bank
- (wo)
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Oslo
- (wann)
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2010
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Natvik, Gisle James
- Norges Bank
Entstanden
- 2010