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A Fiscal Stimulus and Jobless Recovery

Cristiano Cantore\, , Paul Levine\, and Giovanni Melina\, (2013) A Fiscal Stimulus and Jobless Recovery Discussion Paper. International Monetary Fund\.

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Abstract

We analyse the effects of a government spending expansion in a DSGE model with Mortensen-Pissarides labour market frictions, deep habits in private and public consumption, investment adjustment costs, a constant-elasticity-of-substitution (CES) production function, and adjustments in employment both at the intensive as well as the extensive margin. The combination of deep habits and CES technology is crucial. The presence of deep habits magnifies the responses of macroeconomic variables to a fiscal stimulus, while an elasticity of substitution between capital and labour in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery.\

Item Type: Monograph (Discussion Paper)
Additional Information: Reproduced with permission of the authors.
Uncontrolled Keywords: Unemployment\, Fiscal policy\, Government expenditures\, Business cycles\, Economic models\, fiscal polic\
Related URLs:
Divisions: Faculty of Business, Economics and Law > Economics
Depositing User: Symplectic Elements
Date Deposited: 22 May 2012 18:57
Last Modified: 09 Jun 2014 13:44
URI: http://epubs.surrey.ac.uk/id/eprint/427917

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