Experience after the establishment of EMU shows that the behaviour of private consumers differs considerably among member countries and that average and marginal propensities to consume are fairly heterogeneous. In particular, there are clear differences between Germany and the rest of the euro...

We develop a Keynesian cross analysis with a dynamic optimization setting that explains long-run stagnation caused by aggregate demand deficiency. We show that an increase in government purchases boosts GDP through a multiplier process, but the implication is quite different from the...