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
978-82-7553-564-9
Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 2010/14

Klassifikation
Wirtschaft
Business Fluctuations; Cycles
Fiscal Policy
Thema
rule-of-thumb consumers
wealth inequality
government spending
indeterminacy

Ereignis
Geistige Schöpfung
(wer)
Natvik, Gisle James
Ereignis
Veröffentlichung
(wer)
Norges Bank
(wo)
Oslo
(wann)
2010

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Natvik, Gisle James
  • Norges Bank

Entstanden

  • 2010

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