A Study on Government Spending Multiplier with the Enterprise Heterogeneity and Financial Friction Considered
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| Title | A Study on Government Spending Multiplier with the Enterprise Heterogeneity and Financial Friction Considered
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| Author | Wang Liyong and Xu Xiaoli |
| Organization | Central University of Finance and Economics |
| Email | liyongecon@126.com；xuxiaoli513@sina.com |
| Key Words | Enterprise Heterogeneity; Financial Friction; Government Spending Multiplier; DSGE Model |
| Abstract | This paper studies the differences between government investment and consumer spending on the impact of state-owned and non-state-owned economies within a dynamic stochastic general equilibrium framework which incorporates the characteristics of financial friction, price stickiness and enterprise heterogeneity, then re-estimate government investment spending multiplier and consumer spending multiplier. We find that both a rise in government investment spending and consumer spending will reduce the proportion of state-owned economy, but the effect mechanism of the two different kinds of government spending on state-owned economy and non-state-owned economy is quite different. The government investment spending multiplier is greater than government consumer spending multiplier, and for both of these two government spending, the multiplier effect on non-state-owned economy is greater than that of state-owned economy. Financial friction and enterprise heterogeneity have a significant impact on government spending multiplier, compared with the non-consideration of financial friction and enterprise heterogeneity, the inclusion of these characteristics will significantly reduce the government spending multiplier. |
| Serial Number | WP1270 |
| Time | 2018-04-10 |
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