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Closed Form of Fiscal Multipliers in a DSGE model with Liquidity-Constrained households

Author

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  • Kenichi Tamegawa

    (Meiji University)

Abstract

In this paper, we obtain the closed form of fiscal multipliers in a dynamic stochastic general equilibrium model with liquidity-constrained households. The closed form indicates that the first-period multiplier depends monotonically on the fraction of liquidity-constrained households over all the households. When this fraction is one, the maximum value of the multiplier is obtained as the inverse of one minus the labor share. This result indicates that our model has the traditional Keynesian fiscal multiplier (the inverse of one minus the marginal propensity to consume) as a special case.

Suggested Citation

  • Kenichi Tamegawa, 2012. "Closed Form of Fiscal Multipliers in a DSGE model with Liquidity-Constrained households," Economics Bulletin, AccessEcon, vol. 32(4), pages 3148-3157.
    • Handle: RePEc:ebl:ecbull:eb-12-00558
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    fiscal policy; fiscal multipliers; DSGE modeling; liquidity constraint;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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