Seminar Department of Economics and CRENoS 2012 - Cristiano Cantore

16/01/2012 - 12:00 to 14:00


Aula Magna Economia

Via S. Ignazio, 74 - Cagliari



Presentation of the paper

A fiscal stimulus and jobless recovery



Cristiano Cantore

University of Surrey



Cristiano Cantore (University of Surrey), Paul Levine (University of Surrey), and Giovanni Melina (Birkbeck College and University of Surrey)


We analyse the effects of a government spending expansion in a dynamic stochastic general equilibrium (DSGE) model with Mortensen-Pissarides labour market frictions, deep habits and a constant-elasticityof- substitution (CES) production function. The combination of deep habits and CES technology is crucial. 

The presence of deep habits enables the model to deliver output and unemployment multipliers in the high range of recent empirical estimates, while an elasticity of substitution between capital and labour in the range of available estimates allows it to produce a scenario compatible with the observed jobless recovery. An accommodative monetary policy with respect to the output gap alongside sticky prices plays an important role for the stabilisation properties of the fiscal stimulus.



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