In economics the questions are always the same - only the answers change:
Estimated impact on GDP of a permanent increase in government purchases of 1 percent of GDP (Cogan et al.):
Cogan et al. (Feb 2009) conclude:
Estimated impact on GDP of a permanent increase in government purchases of 1 percent of GDP (Cogan et al.):
Cogan et al. (Feb 2009) conclude:
In this paper we used a modern empirical approach to estimate government spending multipliers.. We focused on an empirically estimated macroeconomic model - the Smets-Wouters model - recently published in the AER.Crowding out of consumption and investment in the Feb 2009 stimulus legislation:
We find that the government spending multipliers from permanent increases in federal government purchases are much less in new Keynesian models than in old Keynesian models. The differences are even larger when one estimates the impacts of the actual path of government purchases in fiscal packages, such as the one enacted in Feb 2009 in the US or similar ones discussed in other countries. The multipliers are less than 1 as consumption and investment are crowded out. The impact in the first year is very small. And as the government purchases decline in the later years of the simulation, the multiplier turns negative.
The estimates reported here of the impact of such packages are in stark contrast to those reported in the paper by Christina Romer and Jared Bernstein.
Mahalanobis - am 2009-07-01 20:21 - Rubrik: economics
Stxx (guest) meinte am 1. Jul, 22:57:
An interesting question these days. For every $5 that the consumer does not spend and the banks won't lend the government will engage in its make-whole promise of a super-levered economy and spend $1 instead with multiplier effects...I am not so sure how this multiplier will play out in an environment of low consumer confidence, the threat of tax hikes and the fear of job loss.
Crowding out will be a BIG theme in the coming years
wcw (guest) antwortete am 2. Jul, 01:47:
that paper == hooey
Someone passed it around work (Cogan sits on a board nearabouts). I skimmed it, and the most charitable thing I thought was that, using the same methods and more-reasonable assumptions, you come up with a completely different result. You may also try this more-detailed smackdown written by an actual practitioner.
What is their explanation for assuming a different fiscal policy? ..the monetary policy rule that Romer and Bernstein believe that the Federal Reserve is following makes fiscal policy.. so powerful... [they] are going to make a different assumption about monetary policy that makes fiscal policy weakThis is a paper that reminds me of the old joke they told when I was getting my math undergrad. "Prove all odd numbers are prime," challenges the mathematician. "OK," replies the economist, "assume all odd numbers are prime..."
