Rule-of-thumb consumers in the New Keynesian framework
| Author: | Mgr. Tomáš Adam |
|---|---|
| Year: | 2011 - summer |
| Leaders: | PhDr. Jaromír Baxa Ph.D. |
| Consultants: | |
| Work type: | Economic Theory Masters |
| Language: | English |
| Pages: | 96 |
| Awards and prizes: | M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis. |
| Link: | |
| Abstract: | This thesis investigates the effects of government spending on aggregate economic variables in the Czech Republic. The standard RBC and New Keynesian models assume only forward-looking households despite the evidence of a significant fraction of non-optimizing households. These models do not provide reasonable predictions for the response of consumption: both models predict its fall following a government spending shock. Therefore, a variant of the New Keynesian model, where rule-of-thumb households coexist with optimizing households, is used for the analysis. We have found that fiscal policy has a positive impact on output, although government spending multiplier does not exceed one. Also, the impact on consumption is positive for several periods following a fiscal spending shock, which is consistent with the evidence. |
| Downloadable: | Diploma Thesis of Adam |
