Fiscal policy and the composition of private consumption: some evidence from the U.S. and Canada

Jim Malley, Hassan Molana

    Research output: Working paperDiscussion paper

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    Abstract

    This paper develops a generalised version of the life-cycle model in which consumers’ preferences are defined over components of consumption and are affected by the level of public expenditure on goods and services. The model implies that the crowding out of private consumption could in fact be a direct demand side phenomenon caused by the way preferences respond to a change in public spending. Evidence from U.S. and Canadian data for the period 1935-1995 confirms this theoretical conjecture as well as implying that in both countries demand for durable goods is likely to show relatively large swings which may undermine the stability of the sector and harm the supply side.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2000

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.113
    ISSN (Print)1473-236X

    Keywords

    • Intra-temporal marginal rate of substitution
    • Edgworth complement or substitute
    • Cointegration
    • Error correction

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    Malley, J., & Molana, H. (2000). Fiscal policy and the composition of private consumption: some evidence from the U.S. and Canada. (Dundee Discussion Papers in Economics; No. 113). University of Dundee.