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Why Hasn’t the US Economic Stimulus Been More Effective? The Debate on Tax and Expenditure Multipliers

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Author Info

  • F. Gerard Adams

    ()
    (Department of Economics University of Pennsylvania (emeritus))

  • Byron Ganges

    ()
    (Department of Economics University of Hawaii at Manoa)

Abstract

Recent dissatisfaction with the impact of expenditure stimulus on economic activity in the United States, along with the results of academic research, have once again raised questions about the effectiveness of fiscal stimulus policies and about whether stimulus to a recessionary economy should be in the form of tax cuts or expenditure increases. This paper considers alternative methods for evaluating the impacts of stimulus policy strategies. We discuss conceptual challenges involved in effectiveness measurement, and we review alternative empirical approaches applied in recent studies. We then present our own estimates of policy multipliers based on simulations of the IHS Global Insight model of the US economy. Based on this review and analysis, we address the question of why recent US stimulus programs have not been more effective.

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File URL: http://www.uhero.hawaii.edu/assets/WP_2010-10.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Hawaii Economic Research Organization, University of Hawaii at Manoa in its series Working Papers with number 2010-10.

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Length: 25 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:hae:wpaper:2010-10

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Keywords: United States (US) recession and recovery; fiscal and monetary policy; tax and expenditure multipliers; econometric model forecast simulation.;

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