The Missing Intercept: A Demand Equivalence Approach

The Missing Intercept: A Demand Equivalence Approach Wolf, Christian K I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium “missing intercept” of shocks to private spending identified in the cross section. Through the lens of this theory, time series estimates of a fisca