Fiscal Policy in a Depressed Economy: Was There a 'Free Lunch' in 1930s' Britain?
AbstractWe report estimates of the fiscal multiplier for interwar Britain based on quarterly data and time-series econometrics. We find that the government-expenditure multiplier was in the range 0.3 to 0.9 even during the period when interest rates were at the lower bound. The scope for a 'Keynesian solution' to recession was much less than is generally supposed. In the later 1930s but not before Britain's exit from the gold standard, there was a 'fiscal free lunch' in the sense that deficit-financed government spending would have improved public finances enough to pay for the interest onthe extra debt.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9273.
Date of creation: Jan 2013
Date of revision:
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Other versions of this item:
- Crafts, Nicholas & Mills, Terence C, 2012. "Fiscal Policy in a Depressed Economy: Was There a ‘Free Lunch’ in 1930s’ Britain?," CAGE Online Working Paper Series 106, Competitive Advantage in the Global Economy (CAGE).
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-HIS-2013-04-13 (Business, Economic & Financial History)
- NEP-MAC-2013-04-13 (Macroeconomics)
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