Does the composition of government spending matter for government bond spreads?

How Does Government Spending Stimulate Consumption ?

Recent empirical work finds that government spending shocks cause aggregate consumption to increase over the business cycle, contrary to the predictions of Neoclassical and New Keynesian models. This paper proposes a mechanism to account for the consumption increase that builds on the framework of imperfect information in Lucas (1972) and Lorenzoni (2009). In my model, owners of firms targeted ...

Composition of Government Spending, Optimal Fiscal Policy, and Endogenous Growth in the Economy of Iran

This paper investigates the optimal fiscal policy, pertaining to government spending, considering different productivity of public services in production function and its impact on the optimal tax rate, the optimal rate of government spending, and optimal economic growth rate. Using the VECM model for Iranian economy over 48 years, results show while the current expenditure has a positive and s...

How Does Liquidity Affect Government Bond Yields?∗

The paper explores the determinants of yield differentials between sovereign bonds, using Euro area data. There is a common trend in yield differentials, which is correlated with a measure of aggregate risk. In contrast, liquidity differentials display sizeable heterogeneity and no common factor. We propose a simple model with endogenous liquidity demand, where a bond’s liquidity premium depend...

Reformism Revisited: Does Form of Government Matter?

Government Spending and Growth