Why does private consumption rise after a government spending shock?

Canadian Journal of Economics

Volumn 40, Issue 3, 2007, Pages 954-979

  Bouakez, Hafedh ^a   Rebei, Nooman ^b  

^a HEC MONTRÉAL   (Canada)

^b BANK OF CANADA   (Canada)

Author keywords

[No Author keywords available]

Indexed keywords

BUSINESS CYCLE; CONSUMPTION BEHAVIOR; EMPIRICAL ANALYSIS; MACROECONOMICS; PUBLIC SPENDING; VECTOR AUTOREGRESSION;

NORTH AMERICA; UNITED STATES;

EID: 34547146411     PISSN: 00084085     EISSN: 15405982     Source Type: Journal    
DOI: 10.1111/j.1365-2966.2007.00438.x     Document Type: Article

References (36)

1. Ahmed, S., and B.S. Yoo (1995) 'Fiscal trends and real economic aggregates,' Journal of Money, Credit and Banking 27, 985-1001
2. Amano, R.A., and T.S. Wirjanto (1998) 'Government expenditures and the permanent-income model,' Review of Economic Dynamics 1, 719-30
3. Amato, J.D., and T. Laubach (2003) 'Estimation and control of an optimization-based model with sticky prices and wages,' Journal of Economic Dynamics and Control 27, 1181-215
4. Ambler, S., and E. Cardia (1997) 'Optimal public spending in a business cycle model,' in Business Cycles and Macroeconomic Stability: Should We Rebuild Built-in Stabilizers ?ed. J.-O. Hairault, P.-Y. Hénin, and F. Portier (Boston: Kluwer Academic Press)
5. Aschauer, D. (1985) 'Fiscal policy and aggregate demand,' American Economic Review 75, 117-27
6. Barro, R. (1981) 'Output effects of government purchases,' Journal of Political Economy 89, 1086-21
7. Baxter, M., and R.G. King (1993) 'Fiscal policy in general equilibrium,' American Economic Review 83, 315-34
8. Blanchard, O., and R. Perotti (2002) 'An empirical characterization of the dynamic effects of changes in government spending and taxes on output,' Quarterly Journal of Economics 117, 1329-68
9. Bouakez, H. (2005) 'Nominal rigidity, desired markup variations, and real exchange rate persistence,' Journal of International Economics 66, 49-74
10. Bouakez, H., E. Cardia, and F. Ruge-Murcia (2005) 'Habit formation and the persistence of monetary shocks,' Journal of Monetary Economics 55, 1073-88
11. Burnside, C., M. Eichenbaum, and J. Fisher (2004) 'Fiscal shocks and their consequences,' Journal of Economic Theory 115, 89-117
12. Cardia, E., N. Kozhaya, and F. Ruge-Murcia (2003) 'Distortionary taxation and labor supply,' Journal of Money, Credit and Banking 35, 763-85
13. Christiano, L., and M. Eichenbaum (1992) 'Cyclical effects of government's employment and good purchases,' American Economic Review 82, 430-50
14. Coenen, G., and R. Straub (2005) 'Does government spending crowd in private consumption?Theory and empirical evidence for the Euro area,' International Finance, forthcoming
15. Dib, A. (2003) 'An estimated Canadian DSGE model with nominal and real rigidities,' Canadian Journal of Economics 36, 949-72
16. Edelberg, W., M. Eichenbaum, and J. Fisher (1999) 'Understanding the effects of a shock to government purchases,' Review of Economic Dynamics 2, 166-206
17. Fatás, A., and I. Mihov (2001) 'The effects of fiscal policy on consumption and employment: Theory and evidence,' INSEAD photocopy
18. Feldstein, M. (1982) 'Government deficits and aggregate demand,' Journal of Monetary Economics 9, 1-20
19. Fuhrer, J. (2000) 'Habit formation in consumption and its implications for monetary-policy models,' American Economic Review 90, 367-90
20. Galí, J., J.D. López-Salido, and J. Vallés (2005) 'Understanding the effects of government spending on consumption,' NBER Working Paper No. 11578
21. Hansen, G.D. (1985) 'Indivisible labor and the business cycle,' Journal of Monetary Economics 16, 309-27
22. Heaton, J. (1995) 'An empirical investigation of asset pricing with temporally dependent preference specifications,' Econometrica 63, 681-717
23. Ireland, P. (1999) 'A method of taking models to the data,' Journal of Economic Dynamics and Control 28, 1205-26
24. Ireland, P. (2001) 'Sticky-price models of the business cycle: specification and stability,' Journal of Monetary Economics 47, 3-18
25. Karras, G. (1994) 'Government spending and private consumption: Some international evidence,' Journal of Money, Credit and Banking 26, 9-22
26. Kim, J. (2000) 'Constructing and estimating a realistic optimizing model of monetary policy,' Journal of Monetary Economics 45, 329-59
27. Kormendi, R.C. (1983) 'Government debt, government spending, and private sector behavior,' American Economic Review 73, 994-1010
28. Linnemann, L., and A. Schabert (2003) 'Fiscal policy in the new neoclassical synthesis,' Journal of Money, Credit and Banking 35, 911-29
29. Linnemann, L., and A. Schabert (2004) 'Can fiscal spending stimulate private consumption?' Economics Letters 82, 173-79
30. McGrattan, E.R. (1994) 'The macroeconomic effects of distortionary taxation,' Journal of Monetary Economics 33, 573-601
31. McGrattan, E.R., R. Rogerson, and R. Wright (1997) 'An equilibrium model of the business cycle with household production and fiscal policy,' International Economic Review 38, 267-90
32. Mountford, A., and H. Uhlig (2005) 'What are the effects of fiscal policy shocks?' SFB 649 Discussion Paper No. 2005-039
33. Ni, S. (1995) 'An empirical analysis on the substitutability between private consumption and government purchases,' Journal of Monetary Economics 36, 593-605
34. Okubo, M. (2003) 'Intratemporal substitution between private and government consumption: The case of japan,' Economics Letters 79, 75-81
35. Perotti, R. (2004) 'Estimating the effects of fiscal policy in OECD countries,' UniversitàBocconi Discussion Paper No. 276
36. Ramey, V., and M. Shapiro (1998) 'Costly capital reallocation and the effects of government spending,' Carnegie Rochester Conference on Public Policy 48, 145-94