12/1999
June
Demand Elasticity and Fiscal Policy
 
Alessandra Chirco - Caterina Colombo


In this paper we study the transmission mechanism of fiscal policy based on possible changes in the elasticity of demand. These are obtained by assuming that Â…rms face a balance of public and private demands, each characterized by different price elasticity. We show that in this set-up there exists a range of the technological conditions under which fiscal policy is expansionary, independently of the pro- or counter-cyclical nature of its
impact on the desired mark-up.

 
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