Discussion Paper
Realistic neoclassical multiplier
Abstract: Standard neoclassical models are unable to generate large values for the fiscal multiplier, the aggregate economic response to increased government spending. Empirical estimates place the multiplier between 0.7 and 1.0. Standard models deliver figures close to zero. In an earlier policy paper, we modified the standard model, with features of demand-based productivity. These modifications raised the figure to just 0.17, still very far from the range found in the empirical literature.
Access Documents
File(s):
File format is application/pdf
https://www.minneapolisfed.org/~/media/files/pubs/eppapers/13-5/epp_13-5_neoclassical_multiplier.pdf
Description: Full text
Authors
Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Economic Policy Paper
Publication Date: 2013
Number: 13-5