Christopher Tsoukis c.tsoukis@keele.ac.uk
News, fiscal rules and the Keynesian multiplier in a DSGE model
Tsoukis, Christopher
Authors
Abstract
We extend the standard Smets-Wouters (2007) medium-sized DSGE model to analyse the effects of news and the Keynesian multiplier. News is modelled in a novel way compared to the literature, as revisions of expectations regarding future fundamentals. News-driven expectations changes augment both the consumption Euler equation and a fiscal rule, which is a secondary innovation of the paper. This news channel significantly improves the model fit to data. We calculate the fiscal multipliers which appear more Keynesian (with a higher effect on output and a positive effect on consumption, more persistent) than argued in much preceding literature.
| Acceptance Date | Jul 14, 2020 |
|---|---|
| Publication Date | Sep 14, 2021 |
| Journal | Journal of Development Economics and Finance |
| Print ISSN | 2582-5194 |
| Pages | 61-91 |
| Keywords | DSGE model, news, fiscal policy rule, Keynesian multiplier |
| Publisher URL | http://arfjournals.com/index.php?route=product/product/volumearticle&vissue_id=44&issue_id=64&product_id=411 |
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