Government Purchases and Real Interest Rates

N. Gregory Mankiw

doi:10.1086/261462

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Government Purchases and Real Interest Rates

N. Gregory Mankiw^1,2

¹ National Bureau of Economic Research · ² Harvard University

Journal of Political Economy 1987 open access

This paper examines the dynamic impact of government purchases in a simple general equilibrium model with both durable and non-durable consumer goods as well as productive capital. The model generates perhaps surprising results. In particular, increases in government purchases are shown to cause reductions in real interest rates. The model thus provides a possible explanation for the observed behavior of real interest rates around wars.

DOI: 10.1086/261462
Volume: 95 (2)
Pages: 407-419
Language: en
Export: BibTeX
Sources: crossref openalex