In the Smets-Wouters DSGE model, consumption falls when there is an increase in government spending because of consumption smoothing.

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In the Smets-Wouters DSGE model, consumption falls when there is an increase in government spending because of consumption smoothing. This is because households anticipate that the increase in government spending will lead to higher taxes in the future, and so they reduce their current consumption in order to save for those future taxes.

In the Smets-Wouters DSGE Model, Consumption Falls When There Is