Ricardian equivalence and the intertemporal Keynesian multiplier

Economics Letters (Impact Factor: 0.45). 02/2006; 94(1):118-123. DOI: 10.1016/j.econlet.2006.08.010
Source: RePEc


We show that Keynesian multiplier effects can be obtained in dynamic optimizing models if one combines both price rigidities and a “non-Ricardian” framework where, due for example to the birth of new agents, Ricardian equivalence does not hold.

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    • "Gelecekteki gelirlerin devamlılığına yönelik risk algısı vurgulanarak, Devlet tahvilleri cari dönemde servet etkileri yaratacağı sonucuna ulaşılmıştır 34 . Benassy (2007), Barsky et. al. (1986) eleştirisinden hareket ettiği çalışmasında Keynesyen çarpan etkisini zamanlararası analize genişleterek çarpan etkisinin geçerli olması için Ricardocu-olmayan politikaların önemini vurgulamıştır. "
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    ABSTRACT: In Economic theory, the impact of government debt through wealth effects that enhance the likelihood of real effects in an economy, in which the Ricardian Equivalence fail to hold, is investigated in many studies.Under active fiscal policies as puth foth by Leeper (1991), to equate the intertemporal budget constraint, the increases in price level leads to inflationary periods (Sims, 1991, 1993; Leeper, 1991; Sargent ve Wallace, 1981). As shown by Woodford (1994), in economies, the Quantity Theory of Money, therefore a Money demand function in addition to intertemporal budget constraint equation holds simultaneously, which leads to doubts regarding tests focusing to differentiate Ricardian and Non-Ricardian regimes. In the study, the evaluation methods based on econometric theory and literature are investigated to provide an overlook that follows a path from linear to nonlinear econometric tests. A model will be discussed in accordance with the FTPL theory. Further, the likelihood of increasing failure to evaluate the FTPL theory based on rational expectations with Markov regime switching models will be discussed. STAR type models and their applications to FTPL theory will be discussed.
    SSRN Electronic Journal 10/2011; DOI:10.2139/ssrn.1949448
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    ABSTRACT: In this paper we present a fixprice model in which private and public consumption show some degree of substitution. We offer formulae for the Keynesian multiplier which depend on this degree of substitution. We also show that there is a Pigou effect and that, sometimes, this effect is larger than the Keynesian multiplier.
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    ABSTRACT: We construct in this paper a dynamic general equilibrium model which displays the central features of the IS-LM model, and notably an income multiplier greater than one, so that crowding out does not occur. It appears that the key to this result is the conjunction of two features of our model: price rigidities (as is usually expected), but also a non-Ricardian economy.
    Economics Letters 02/2006; 96(2). DOI:10.1016/j.econlet.2006.12.028 · 0.45 Impact Factor
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