The Fiscal Stimulus Debate "Bone-Headed" and "Neanderthal"?

Publication: Policy Letter No. 3, 2009
Topic Area: Macro Finance
Authors: Volker Wieland
Date: Mar 2009
Keywords: fiscal policy, new Keynesian macroeconomic models
Abstract:

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.

Download PDF

Back to list