Government Purchases and Real Interest Rates
26 Pages Posted: 28 May 2004 Last revised: 30 Dec 2022
Date Written: August 1986
Abstract
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.
Suggested Citation: Suggested Citation
Mankiw, N. Gregory, Government Purchases and Real Interest Rates (August 1986). NBER Working Paper No. w2009, Available at SSRN: https://ssrn.com/abstract=249499
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