Template-type: ReDif-Paper 1.0
Author-Name: Kühn Stefan 
Author-Name: Muysken Joan 
Author-Name: Veen Tom van
Author-workplace-name: METEOR
Title: The Adverse Effects of Government Spending on Private Consumption in New Keynesian Models
Abstract: Empirical evidence shows that government spending crowds in private consumption, a Keynesian phenomenon. The current state of the art, New Keynesian models based on optimising households and _rms, is not able to predict such a result. We show with a graphical framework as well as a formal model why the basic New Keynesian model fails at this. We also show the weaknesses of extensions aimed at generating crowding in like useful government spending or rule of thumb consumers. Finally, we argue that introducing productivity enhancing government spending could potentially lead to crowding in.
Keywords: macroeconomics ; 
Series: Research Memoranda
Creation-Date: 2009
Number: 004
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:b16a5c3c-7c68-4cc2-a2a1-ffded4d4efe7/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 335137
Handle: RePEc:unm:umamet:2009004