The State-Dependent Dynamic of Government Spending Multipliers: Rule of Thumb Consumption Endogeneity and State-Dependent EIS (Elasticity of Intertemporal Substitution)
| Componente | Categoria |
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| Salvatore Nistico' | Aggiungi Tutor di riferimento (Professore o Ricercatore afferente allo stesso Dipartimento del Proponente) |
This paper analyzes the dependency of Government Spending Multipliers (GSM) for US economy on the Business Cycle, both empirically and theoretically. The empirical model based on Local Projection showed a non-monotonic relation between GSM and the Business Cylce, with the lowest multipliers occurring in periods of slack, and the highest occurring in normal times (whenever the GDP is around the Steady-State). Expansionary periods are related to intermediate multipliers. For understanding the transmission mechanisms behind the variability of GSM, a microeconomic model has been developed. Following the piioneristic contribution of the "Lambda-Model" of Cambpell and Mankiw, a "Smooth Transition Lambda-Model" has been implemented. From the model arised a State-Dependency for both the EIS (Elasticity of intertemporal Substitution) and the Propensity to Consume (PC), in particular showing a non zero EIS only in periods of real GDP contraction and a non-monotonic dynamic for the PC.
These last results have been integrated in a TANK (Two-Agents New-Keynesian) Model, in order to study the macroeconomic impact of the public spending innovation, and to reconcile theory and evidence.