Mba, Leopold EngozogoNallari, Raj2012-03-192012-03-192010-04-01https://hdl.handle.net/10986/3764This paper uses the central tool of an investment-savings and monetary-policy model with an augmented Philips curve and presents a few extensions of that model to analyze the multiplier effects of macroeconomic policies in the United States. In doing so, the authors incorporate realistic assumptions in the model related to the recent financial characteristics of the global economy. The monetary policy reaction function embeds a new augmented Taylor-rule incorporating housing and stock prices and the credit lending rate. And the household consumption and firm investment decisions incorporate housing and stock assets and the credit market frictions. The equilibrium income is derived and compared with the actual nominal gross domestic product of the United States for the period 1990 to 2009. More importantly, fiscal and trade multipliers are derived and discussed. The main finding is that government spending, tax cut, and trade multipliers are relatively smaller in size when more realistic features are incorporated in the model. The model simulation shows that the model can track actual gross domestic product reasonably well. The model should be further improved before it could be used for policy exercises.CC BY 3.0 IGOADVANCED COUNTRIESADVANCED ECONOMIESAGGREGATE DEMANDAGGREGATE SUPPLYAGGREGATE SUPPLY CURVEASSET PRICESASSET VALUESASSETSAVAILABILITY OF CREDITBALANCE SHEETBALANCE SHEETSBANK INTEREST RATEBANKING SECTORBANKRUPTCYBONDBOOM-BUST CYCLESBUDGET CONSTRAINTBUSINESS CYCLESCAPITAL ASSETSCAPITAL GAINSCAPITAL INFLOWSCAPITAL INVESTMENTCAPITAL MARKETCAPITALIZATIONCENTRAL BANKCENTRAL BANKSCLOSED ECONOMIESCLOSED ECONOMYCOLLATERALCOMMODITYCOMMODITY PRICESCONSUMER DURABLESCONSUMER SPENDINGCONSUMERSCONSUMPTION FUNCTIONCORPORATE TAXESCREDIT CONSTRAINED FIRMSCREDIT MARKETCREDIT MARKETSCREDIT SPREADSCREDITORCREDITSCURRENT ACCOUNTDEBTDEPOSITSDERIVATIVEDEVALUATIONDEVELOPING COUNTRIESDEVELOPING ECONOMIESDEVELOPMENT POLICYDISCRETIONARY FISCAL POLICYDISPOSABLE INCOMEDOMESTIC BONDSDOMESTIC ECONOMYDOMESTIC INFLATIONECONOMIC ACTIVITYECONOMIC AGENTSECONOMIC CRISISECONOMIC OUTLOOKECONOMIC POLICYECONOMIC RESEARCHELASTICITYEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET COUNTRIESENDOGENOUS VARIABLESEQUILIBRIUMEXCHANGE RATEEXCHANGE RATE REGIMESEXCHANGE RATESEXPANSIONARY FISCAL POLICYEXPANSIONARY POLICIESEXPOSUREFEDERAL RESERVEFINANCESFINANCIAL ASSETSFINANCIAL CONTAGIONFINANCIAL CRISISFINANCIAL DISTRESSFINANCIAL INNOVATIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIATIONFINANCIAL MARKETFINANCIAL SYSTEMFISCAL POLICYFISCAL STIMULUSFIXED EXCHANGE RATEFLEXIBLE EXCHANGE RATEFLEXIBLE EXCHANGE RATE REGIMEFOREIGN COMPETITIONFOREIGN INTERESTFOREIGN INTEREST RATEFOREIGN INTEREST RATESFOREIGN TRADEGDPGLOBAL ECONOMYGOVERNMENT BONDGOVERNMENT BONDSGOVERNMENT BUDGETGOVERNMENT DEFICITGOVERNMENT EXPENDITUREGOVERNMENT SPENDINGGROSS DOMESTIC PRODUCTHEDGE FUNDSHOLDINGHOLDINGSHOUSEHOLD WEALTHHOUSEHOLDSINCOMEINCOME LEVELINCOME TAXINFLATIONINFLATION EXPECTATIONSINFLATION RATEINSTRUMENTINSURANCE POLICIESINTEREST ON BONDSINTEREST PAYMENTSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL MONETARY FUNDINTERNATIONAL TRADEINVESTMENT DECISIONINVESTMENT DECISIONSINVESTMENT FUNCTIONINVESTMENT VEHICLELIFE-INSURANCELIQUIDITYLOANLOAN RATEMACROECONOMIC POLICIESMACROECONOMICSMARGINAL PROPENSITY TO CONSUMEMARGINAL PROPENSITY TO IMPORTMARKET CONTAGIONMARKET LENDINGMARKET PRICEMARKET VALUEMARKET VALUESMONETARY ASSETSMONETARY ECONOMICSMONETARY FUNDMONETARY POLICIESMONETARY POLICYMONETARY POLICY REACTION FUNCTIONMONETARY POLICY RULEMONETARY TRANSMISSIONMONETARY TRANSMISSION MECHANISMMONEY CREATIONMONEY MARKETMONEY SUPPLYMORTGAGEMORTGAGE-BACKED SECURITIESMULTIPLIER EFFECTSMULTIPLIERSNATIONAL INCOMENET EXPORTSNET WORTHNOMINAL EXCHANGE RATENOMINAL INTEREST RATEOPEN ECONOMIESOPEN ECONOMYOUTPUTOUTPUT GAPPENSIONPENSION FUNDSPERMANENT INCOMEPERPETUITYPERSONAL INCOMEPHILLIPS CURVEPOLICY RESPONSEPRICE ELASTICITYPRIVATE INVESTMENTPROBABILITY OF DEFAULTPUBLIC FINANCESPUBLIC INVESTMENTPUBLIC SPENDINGREAL ESTATEREAL INTERESTREAL INTEREST RATERECEIPTSRECESSIONRECESSIONSREINVESTMENTSAVINGSSPECULATIVE BUBBLESSTOCK MARKETSTOCK MARKETSSTOCK PRICESTOCK PRICESSTOCKSTAXTAX RATETERMS OF CAPITALTOTAL DEBTTRADE BALANCETRADE BALANCESUNEMPLOYMENTWEALTHWORLD MARKETSWORLD TRADEWorld Bank10.1596/1813-9450-5277