Downward nominal wage rigidity and state-dependent government spending multipliers

• 成果类型: Article
• 署名作者: Shen, Wenyi; Yang, Shu-Chun S.
• 署名单位: Oklahoma State University System; Oklahoma State University - Stillwater; National Sun Yat Sen University; International Monetary Fund
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2018.04.006
• 发表日期: 2018
• 页码: 11-26
• 关键词: Business cycle-dependent multiplier; State dependent government spending effects; Downward nominal wage rigidity; Fiscal policy effects; New Keynesian models

摘要

Despite much empirical evidence on business cycle-dependent government spending multipliers, the theoretical channels underlying such results are uncertain. In an environment with involuntary unemployment, this paper shows that downward nominal wage rigidity, which arises only in recessions, can generate business cycle-dependent government spending multipliers. In line with Keynesian views, a demand stimulus reduces unemployment in recessions and may not drive up inflation and wages as in expansions. Thus, the positive income effects from reduced unemployment and weaker crowding-out effects from a smaller increase in the real interest rate enhance the expansionary spending effects in recessions. The theoretical implications are largely consistent with existing empirical evidence on business cycle-dependent government spending effects on key macroeconomic variables. (C) 2018 Elsevier B.V. All rights reserved.