NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Government Purchases and Real Interest Rates

N. Gregory Mankiw

NBER Working Paper No. 2009 (Also Reprint No. r0896)
Issued in August 1986
NBER Program(s):   EFG   ME

This paper examines the dynamic impact of government purchases in a simple general equilibrium model with both durable and non-durable consumer goods as well as productive capital. The model generates perhaps surprising results. In particular, increases in government purchases are shown to cause reductions in real interest rates. The model thus provides a possible explanation for the observed behavior of real interest rates around wars.

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Document Object Identifier (DOI): 10.3386/w2009

Published: Mankiw, N. Gregory. "Government Purchases and Real Interest Rates." Journal of Political Economy, Vol. 95, No. 2, (April 1987), pp. 407-419. citation courtesy of

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