Working Paper

Understanding the effects of a shock to government purchases


Abstract: This paper investigates the consequences of an exogenous increase in U.S. government purchase. We find the in response to such a shock, employment, output, and nonresidential investment rise, while real wages, residential investment and consumption expenditures fall. The paper argues that a simple variant of neoclassical growth model which distinguishes between nonresidential and residential investment is consistent with this evidence.

Keywords: Expenditures, Public;

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Authors

    Edelberg, Wendy

    Fisher, Jonas D. M.

    Eichenbaum, Martin

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 1998

Number: WP-98-7