The LU-EAGLE Model with Disaggregated Public Expenditure
|Auteur||Pablo Garcia Sanchez and Alban Moura|
Abstract. We augment the original LU-EAGLE model with disaggregated public expenditure, allowing for (i) a distinction between public consumption and investment expenditures, (ii) complementarity between public and private consumption, (iii) a productive role for public capital, and (iv) separate private and public employment. This extended model embeds a wide range of transmission channels from public expenditures and allows for a detailed analysis of the general-equilibrium effects of public demand in Luxembourg. Model simulations suggest that a rise in public employment induces the strongest GDP response in the short run, while a rise in public investment has the largest effects in the long run. The results also indicate that crowding-out effects through changes in net exports are essential in determining fiscal multipliers for small open economies such as Luxembourg.
|Téléchargement||Cahier d'étude 135 (pdf, 2 MByte)|