Public consumption over the business cycle

• 成果类型: Article
• 署名作者: Bachmann, Ruediger; Bai, Jinhui H.
• 署名单位: RWTH Aachen University; Georgetown University
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE250
• 发表日期: 2013
• 页码: 417-451
• 关键词: Public consumption; aggregate productivity shocks; business cycles; implementation lags; implementation costs; taste shocks; time-consistent public policy

摘要

What fraction of the business cycle volatility of government purchases is accounted for as endogenous reactions to overall macroeconomic conditions? We answer this question in the framework of a neoclassical representative household model where the provision of a public consumption good is decided upon endogenously and in a time-consistent fashion. A simple version of such a model with aggregate productivity as the sole driving force fails to match important features of the business cycle dynamics of public consumption, which comes out as not as volatile and persistent as in the data and too synchronized with the cycle. We add implementation lags and implementation costs in the budgeting process to the model, plus taste shocks for public consumption relative to private consumption, and achieve a better fit to the data. All these ingredients are essential to improve the fit. In our baseline specification 50% of the variance of public consumption is driven by aggregate productivity shocks.