GDP Steady-State Multipliers under Imperfect Competition Revisited

Posted: 23 Sep 2008

See all articles by Luís F. Costa

Luís F. Costa

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa; REM - Research in Economics and Mathematics; UECE - Research Unit on Complexity and Economics

Date Written: February 14, 2007

Abstract

New Keynesian general-equilibrium static models showed the fiscal multiplier is an increasing function of the degree of monopoly. Here, I develop a simple intertemporal model allowing us to study the steady-state role of optimal capital stock (and depreciation) in the fiscal policy transmission mechanism. The GDP multiplier may be locally decreasing in the degree of monopoly when the number of firms is fixed, but results depend strongly on the set of parameter values chosen. Using a net-output definition or allowing for free entry leads to unambiguous dominance of the long-run monopolistic multiplier over the Walrasian one.

Keywords: Multiplier, Fiscal policy, Monopolistic competition

JEL Classification: D5, E0, E3, H6

Suggested Citation

Costa, Luís Filipe Pereira da, GDP Steady-State Multipliers under Imperfect Competition Revisited (February 14, 2007). Portuguese Economic Journal, Vol. 6, No. 3, pp. 181-204, 2007, Available at SSRN: https://ssrn.com/abstract=1271605

Luís Filipe Pereira da Costa (Contact Author)

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa ( email )

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HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
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Lisboa, 1249-078
Portugal

HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

UECE - Research Unit on Complexity and Economics

ISEG, U. Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

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