The Fiscal Stimulus Debate "Bone-Headed" and "Neanderthal"?
|Publication:||Policy Letter No. 3, 2009|
|Topic Area:||Macro and Finance|
|Keywords:||fiscal policy, new Keynesian macroeconomic models|
US economic advisers called for aggressive fiscal stimulus, and some support further measures. But many macroeconomists are not so sure. This column analyses fiscal stimulus using a New Keynesian model that exemplifies contemporary academic thinking on the subject. It says that the spending multiplier is much lower than the Obama administration’s estimates – government spending may quickly crowd out private consumption and investment.
Back to list