Downward nominal wage rigidity and state-dependent government spending multipliers

• Published in: Journal of monetary economics Vol. 98; pp. 11 - 26
• Main Authors: Shen, Wenyi, Yang, Shu-Chun S.
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.10.2018
• Subjects: Business cycle-dependent multiplier; Downward nominal wage rigidity; Fiscal policy effects; New Keynesian models; State dependent government spending effects; E62; E31; Downward nominal wage rigidity; New Keynesian models; H30; Business cycle-dependent multiplier; State dependent government spending effects; Fiscal policy effects

•Downward nominal wage rigidity generates business cycle-dependent government spending multipliers.•Government spending in recessions reduces unemployment and does not drive up the real interest rate as much as in expansions.•The baseline simulation generates an impact output multiplier of 1.37 in r...