We analyze the effects of a government-spending expansion in a dynamic stochastic general equilibrium model with Mortensen-Pissarides labor-market frictions, deep habits in private and public consumption, investment adjustment costs, a constant elasticity of substitution (CES) production function, and adjustments in employment at both intensive and extensive margins. 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 labor in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery. © The editors of The Scandinavian Journal of Economics 2014.

A fiscal stimulus and jobless recovery / Cantore, C.; Levine, P.; Melina, G.. - In: SCANDINAVIAN JOURNAL OF ECONOMICS. - ISSN 0347-0520. - 116:3(2014), pp. 669-701. [10.1111/sjoe.12066]

A fiscal stimulus and jobless recovery

Cantore C.;
2014

Abstract

We analyze the effects of a government-spending expansion in a dynamic stochastic general equilibrium model with Mortensen-Pissarides labor-market frictions, deep habits in private and public consumption, investment adjustment costs, a constant elasticity of substitution (CES) production function, and adjustments in employment at both intensive and extensive margins. 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 labor in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery. © The editors of The Scandinavian Journal of Economics 2014.
2014
CES production function; deep habits; fiscal policy; labor-market search-match frictions; unemployment
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A fiscal stimulus and jobless recovery / Cantore, C.; Levine, P.; Melina, G.. - In: SCANDINAVIAN JOURNAL OF ECONOMICS. - ISSN 0347-0520. - 116:3(2014), pp. 669-701. [10.1111/sjoe.12066]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1676282
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