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A Fiscal Stimulus and Jibless Recovery

Levine, PL, Cantore, C and Melina, G., A Fiscal Stimulus and Jibless Recovery In: RES Annual Conference, 2012-03-26 - 2012-03-28, Cambridge University.

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Abstract

We analyse the effects of a government spending expansion in a dynamic stochastic general equilibrium (DSGE) model with Mortensen-Pissarides labour market frictions, deep habits and a constant-elasticity-of-substitution (CES) production function. The combination of deep habits and CES technology is crucial. The presence of deep habits enables the model to deliver output and unemployment multipliers in the high range of recent empirical estimates, while an elasticity of substitution between capital and labour in the range of available estimates allows it to produce a scenario compatible with the observed jobless recovery. An accommodative monetary policy with respect to the output gap alongside sticky prices plays an important role for the stabilisation properties of the fiscal stimulus.

Item Type: Conference or Workshop Item (UNSPECIFIED)
Authors :
NameEmailORCID
Levine, PLp.levine@surrey.ac.ukUNSPECIFIED
Cantore, CUNSPECIFIEDUNSPECIFIED
Melina, G., UNSPECIFIEDUNSPECIFIED
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:13
Last Modified : 17 May 2017 14:32
URI: http://epubs.surrey.ac.uk/id/eprint/818056

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