Understanding the Effects of a Shock to Government Purchases

Wendy Edelberg*, Martin Eichenbaum, Jonas D.M. Fisher

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

144 Scopus citations


This paper investigates the consequences of an exogenous increase in U.S. government purchases. We find that in response to such a shock, employment, output, and nonresidential investment rise, while real wages, residential investment, and consumption expenditures fall. The paper argues that a simple variant of the neoclassical growth model which distinguishes between nonresidential and residential investment is consistent with this evidence.Journal of Economic LiteratureClassification Numbers: E1, E6.

Original languageEnglish (US)
Pages (from-to)166-206
Number of pages41
JournalReview of Economic Dynamics
Issue number1
StatePublished - Jan 1999

ASJC Scopus subject areas

  • Economics and Econometrics

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