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Yoonseok Choi
''Government spending multipliers: New results from a model of naiveté''
( 2019, Vol. 39 No.3 )
The aim of this paper is to explore dynamic impacts of a government spending shock on key macro-aggregates by developing a neoclassical model of naiveté. The main finding reveals that the model of naiveté delivers much larger present-value multipliers of output than a typical neoclassical model. Moreover, the model of naiveté can resolve the consumption puzzle of government spending by producing the crowding-in effect on consumption. Dynamic responses and multiplier effects of other variables are also discussed.
Keywords: Government spending, present-value multipliers, hyperbolic discounting, naiveté
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Manuscript Received : Jun 28 2019 Manuscript Accepted : Sep 30 2019

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