TY  - JOUR
AU  - Aiyagari,S. Rao
AU  - Christiano,Lawrence J.
AU  - Eichenbaum,Martin
TI  - The Output, Employment, and Interest Rate Effects of Government Consumption
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3330
PY  - 1990
Y2  - April 1990
UR  - http://www.nber.org/papers/w3330
L1  - http://www.nber.org/papers/w3330.pdf
N1  - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu

Martin S. Eichenbaum
Department of Economics
Northwestern University
2003 Sheridan Road
Evanston, IL  60208
Tel: 847/491-8232
Fax: 847/491-7001
E-Mail: eich@northwestern.edu
AB  - This paper investigates the impact on aggregate variables of changes in government consumption in the context of a stochastic, neoclassical growth model. We show, theoretically, that the impact on output and employment of a persistent change in government consumption exceeds that of a temporary change. We also show that, in principle, there can be an analog to the Keynesian multiplier in the neoclassical growth model. Finally, in an empirically plausible version of the model, we show that the interest rate impact of a persistent government consumption shock exceeds that of a temporary one. Our results provide counter examples to existing claims in the literature. 
ER  -