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Keeping up with the Joneses and the consumption response to government spending

Author

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  • Huang, Kevin X.D.
  • Liu, Fengqi
  • Meng, Qinglai
  • Xue, Jianpo

Abstract

A key empirical regularity regrading the effect of fiscal policy is that private consumption tends to increase in response to a hike in government spending. In this paper, we provide an explanation for this stylized fact based on the notion of Keeping Up with the Joneses (KUJ), another empirical observation well documented in the literature.

Suggested Citation

  • Huang, Kevin X.D. & Liu, Fengqi & Meng, Qinglai & Xue, Jianpo, 2022. "Keeping up with the Joneses and the consumption response to government spending," Economics Letters, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003433
    DOI: 10.1016/j.econlet.2022.110869
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    More about this item

    Keywords

    Keeping Up with the Joneses; Private consumption; Government spending;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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