Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods

Journal article: Nonseparable preferences over consumption and leisure can generate an increase in private consumption in response to government spending, as found in the data, in a frictionless business cycle model. However, the conditions on preferences required for these result to obtain hold if and only if the consumption good is inferior. Similarly, positive co-movement of consumption and hours worked occurs if and only if either consumption or leisure is inferior.

Author(s)

Florin Bilbiie

Journal
  • Journal of Money, Credit and Banking
Date of publication
  • 2009
Keywords JEL
D11 E21 E62 H31
Keywords
  • Nonseparable preferences
  • Fiscal policy
  • Government spending
  • Private consumption
  • Inferior goods
Pages
  • 443-450
Version
  • 1
Volume
  • 41