Multiplier effects in a neoclassical model with a production lag

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Abstract

The paper examines the effects of introducing a one-period production lag into what is otherwise a fairly standard macroeconomic model. Depending upon the relative elasticities of aggregate demand and supply it is possible that such a neoclassical model can produce extreme Keynesian results.The response of output to changes in government consumption can be greater even than the simple multiplier; this effect can be greater under rational expectations than under adaptative expectations. Introducing an efficiency wage story into the model leads naturally to the existence of a Phillips curve.
Original languageEnglish
Pages (from-to)349-367
Number of pages19
JournalMetroeconomica
Volume43
Issue number3
Publication statusPublished - Oct 1992

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