Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks
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2014
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ndltd-OhioLink-oai-etd.ohiolink.edu-osu14054664292021-08-03T06:26:00Z Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks Li, Rong Economics This study focuses on the effects of unexpected changes in government spending. More specifically, I investigate the quantitative aggregate and heterogeneous effects of government spending shocks as well as the interaction between fiscal and monetary policies.Existing studies demonstrate that the economy is responsive to unexpected changes in government spending, yet the majority emphasize the aggregate effects and treat government spending as consisting entirely of expenditure on goods. In Chapter 1, I show that distinguishing two components of government spending is important, because the shocks of these two components have opposing effects on the private sector. Quantitatively, a one dollar increase in government purchases on goods and services from the private sector leads to a $1.41 to $1.80 increase in the private sector output. However, a one dollar increase in government purchases on goods and services from the government sector results in a $0.45 to $0.47 loss of the private sector output. The policy implication is that in order to stimulate the private sector output, the government needs to spend money in the private sector instead of the government sector. Moreover, this paper can potentially reconcile the conflicts among different identification strategies regarding the response of private consumption. That is, the response of consumption varies with the structure of the identified government spending shocks. Chapter 2 studies the heterogeneous effects of government spending shocks, and examines the welfare implications of postwar U.S. government spending shocks. Government spending shocks affect households by creating wealth effects, changing tax rates and changing factor prices. I distinguish between government goods purchases and government employee compensation because shocks to these two components have different impacts on the real interest rate and the real wage rate. Households responses and their welfare gain (or loss) depend on the type of government spending shocks and their wealth. Quantitative investigation is conducted using a calibrated heterogeneous-agents model with incomplete markets. My analysis reveals that the identified postwar U.S. government spending shock has reduced households welfare and amplified inequality.Chapter 3 revisits the sizes of fiscal multipliers under a pegged nominal interest rate. The short-run effects of policy shocks also depend on expectations about future policy adjustment. I demonstrate how expected government spending reversals alter the impacts of fiscal policy under an interest rate peg. If the monetary-fiscal expansion is associated with an anticipated spending reversal, the output multiplier can be smaller than one and the inflation multiplier is in line with the empirical evidence in the literature. 2014-10-10 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1405466429 http://rave.ohiolink.edu/etdc/view?acc_num=osu1405466429 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
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NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Economics |
| spellingShingle |
Economics Li, Rong Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| author |
Li, Rong |
| author_facet |
Li, Rong |
| author_sort |
Li, Rong |
| title |
Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| title_short |
Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| title_full |
Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| title_fullStr |
Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| title_full_unstemmed |
Essays on the Aggregate and Heterogeneous Effects of Government Spending Shocks |
| title_sort |
essays on the aggregate and heterogeneous effects of government spending shocks |
| publisher |
The Ohio State University / OhioLINK |
| publishDate |
2014 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1405466429 |
| work_keys_str_mv |
AT lirong essaysontheaggregateandheterogeneouseffectsofgovernmentspendingshocks |
| _version_ |
1719436789343584256 |