Comment

Following the motivation expressed in the Introduction Cheung sets out what he plans to do in Chapter 12. First, he combines two sources of demand and supply externalities in the market into a dynamic model and then ranks all potential equilibria. Secondly, he supports Ng’s negative multiplier in a balanced budget setting, which was once questioned by Mankiw (1988) and Startz (1989). Hence it is not hard to understand his intention to make a distinction between the New Keynesian and the Keynesian models by demonstrating the effectiveness of fiscal policy. My comments arise from such a distinction as well as modelling a wage tax to pay for redistribution benefit.