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Fiscal Policy Puzzles and Intratemporal Substitution among Private Consumption, Government Spending and Leisure

Author

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  • Masataka Eguchi

    (Graduate School of Economics, Keio University)

  • Yuhki Hosoya

    (Graduate School of Economics, Keio University)

Abstract

This paper investigates how does the response of private consumption to government spending be changed by intratemporal substitution among private consumption, government spending and leisure. We show that the response of private consumption to government spending can be positive even if private consumption and government spending are not complements and private consumption and leisure are not substitutes. In this case, substitution between leisure and government spending plays important role. This view has been overlooked in previous work.

Suggested Citation

  • Masataka Eguchi & Yuhki Hosoya, 2009. "Fiscal Policy Puzzles and Intratemporal Substitution among Private Consumption, Government Spending and Leisure," Keio/Kyoto Joint Global COE Discussion Paper Series 2009-032, Keio/Kyoto Joint Global COE Program.
    • Handle: RePEc:kei:dpaper:2009-032
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    References listed on IDEAS

    as
    1. Robert A. Amano & Tony S. Wirjanto, 1998. "Government Expenditures and the Permanent-Income Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 719-730, July.
    2. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December.
    3. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
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