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On the ease of overstating the fiscal stimulus in the US, 2008-9

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  • Joshua Aizenman
  • Gurnain Kaur Pasricha

Abstract

This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. We discuss the implications of limitations on states' ability to run deficits for the design of fiscal stimulus at the federal level. We devote particular attention to intertemporal moral hazard concerns in a federal fiscal system, and ways to address these concerns.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15784.

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Date of creation: Feb 2010
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Handle: RePEc:nbr:nberwo:15784

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  1. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
  2. Carlos de Resende & René Lalonde & Stephen Snudden, 2010. "The Power of Many: Assessing the Economic Impact of the Global Fiscal Stimulus," Discussion Papers 10-1, Bank of Canada.
  3. Clemente, Jesus & Montanes, Antonio & Reyes, Marcelo, 1998. "Testing for a unit root in variables with a double change in the mean," Economics Letters, Elsevier, vol. 59(2), pages 175-182, May.
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Cited by:
  1. James R. Hines Jr., 2010. "State Fiscal Policies and Transitory Income Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(2 (Fall)), pages 313-350.
  2. Aizenman, Joshua & Pasricha, Gurnain, 2011. "The Net Fiscal Expenditure Stimulus in the U.S., 2008-9: Less than What You Might Think, and Less than the Fiscal Stimuli of Most OECD Countries," Santa Cruz Department of Economics, Working Paper Series qt9sr9m8wt, Department of Economics, UC Santa Cruz.
  3. Glenn Follette & Byron Lutz, 2010. "Fiscal policy in the United States: automatic stabilizers, discretionary fiscal policy actions, and the economy," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2010-43, Board of Governors of the Federal Reserve System (U.S.).
  4. Heinz Handler, 2013. "The Eurozone: Piecemeal Approach to an Optimum Currency Area," WIFO Working Papers, WIFO 446, WIFO.

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