Fiscal policy in general equilibrium: empirical estimates from an error correction model
- 1 July 1999
- journal article
- research article
- Published by Taylor & Francis in Applied Economics
- Vol. 31 (7) , 907-913
- https://doi.org/10.1080/000368499323878
Abstract
Recent general equilibrium models of fiscal policy suggest that the government purchases multiplier can exceed unity and that the multiplier should be larger in the long run that in the short run. These results follow from dynamic supply-side interactions of labour and capital, and are in sharp contrast to the implications of earlier equilibrium models. A cointegrating regression and an error correction model are used to test these implications of the equilibrium model of fiscal policy empirically. Data for post-war USA provide strong empirical support for the equilibrium model.This publication has 14 references indexed in Scilit:
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