Fiscal Policy Effectiveness: Lessons from the Great Recession
AbstractThis paper reconsiders fiscal policy effectiveness in light of the recent economic crisis. It examines the fiscal policy approach advocated by the economics profession today and the specific policy actions undertaken by the Bush and Obama administrations. An examination of the labor market renders the contemporary aggregate demand–management approach wholly inadequate for achieving certain macroeconomic objectives, such as the stabilization of investment and investor expectations, the generation and maintenance of full employment, and the equitable distribution of incomes. The paper reconsiders the policy effectiveness of alternative fiscal policy approaches, and argues that a policy that directly targets the labor demand gap (as opposed to the output gap) is far more effective in stabilizing employment, incomes, investment, and balance sheets.
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Bibliographic InfoPaper provided by Levy Economics Institute, The in its series Economics Working Paper Archive with number wp_649.
Date of creation: Jan 2011
Date of revision:
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Web page: http://www.levyinstitute.org
The Great Recession; Fiscal Policy; Macroeconomic Stabilization; Employment;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-MAC-2011-01-30 (Macroeconomics)
- NEP-PKE-2011-01-30 (Post Keynesian Economics)
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