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Full-Text Articles in Business Law, Public Responsibility, and Ethics
The Marginal Cost Of Funds With Nonseparable Public Spending, Shaghil Ahmed, Dean D. Croushore
The Marginal Cost Of Funds With Nonseparable Public Spending, Shaghil Ahmed, Dean D. Croushore
Economics Faculty Publications
This article provides new calculations of the welfare effects of fiscal changes when the publicly provided good is nonseparable in utility and production so that it affects economic agents' marginal decisions. The authors' results show that these nonseparabilities significantly alter the marginal cost of funds (MCF) that previous studies have calculated. The authors also report estimates of the nonseparable marginal benefits (NSMB) associated with aggregate government purchases. The net marginal cost offunds (NMCF ), which is equal to MCF - NSMB, is in general positive over a wide range of parameter values that encompass empirically relevant specifications. Thus the nonseparable …
The Effect Of Government Deficits On Consumption And Interest Rates: A Two Equation Approach, Dean D. Croushore
The Effect Of Government Deficits On Consumption And Interest Rates: A Two Equation Approach, Dean D. Croushore
Economics Faculty Publications
Single-equation estimation of the consumption function often is used in testing the Ricardian equivalence theorem. This approach may be misleading, as effects on interest rates usually are ignored. This paper proposes simultaneous estimation of consumption and investment equations, with the interest rate serving to equilibrate the market. Five existing studies are replicated and subjected to sensitivity tests. The results show that the interest rate is important in the consumption function. The Ricardian equivalence theorem is tested, but the results are mixed.