Advanced Search
MyIDEAS: Login

Post Crisis Policy: Some Reflections of a Keynesian Economist

Contents:

Author Info

  • Karl Aiginger

    (WIFO)

Abstract

This paper compares the depth and length of the recent crisis with the Great Depression in the 1930s. It claims that economic policy played a crucial role in shortening and curtailing the recent crisis. We analyse which policies were applied during the recent crisis and which measures worked. We know that policies relying on large infrastructure projects inherently involve an implementation lag. These lags have been very high in the recent crisis and some expenditure planned will maybe never be spent. We therefore suggest implementing a leakage rate for government expenditure programs which represents the part of intended public expenditures not spent in the first twelve months after the program is set into action. It might be higher than the savings rate out of a tax cut. Furthermore, exit strategies should ideally cut expenditure to the same extent as the increase in government spending during the crisis had been, so that sooner or later tax rates and debt rates may return to pre crisis levels. The core of the Keynesian policy recommendation is to raise expenditure in the crisis but to achieve a balanced budget over a full cycle. If expenditure is not cut after the crisis tax and/or debt rates will increase after each downturn and the basis for any Keynesian policy in the next crisis will be eroded. This does not preclude that it might be useful in the exit phase to change the tax structure in order to lower taxes on labour, specifically for low wages, while increasing taxes on financial transactions, carbon dioxide emissions, capital gains or property. This would lower unemployment and boost demand in economies with tendencies to underconsume.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wifo.ac.at/wwa/jsp/index.jsp?fid=23923&id=39401&typeid=8&display_mode=2&pub_language=2&language=2
File Function: Abstract
Download Restriction: no
File URL: http://www.wifo.ac.at/wwa/servlet/wwa.upload.DownloadServlet/bdoc/PRIVATE51675/WP_2010_371$.PDF
File Function: full text
Download Restriction: no

Bibliographic Info

Paper provided by WIFO in its series WIFO Working Papers with number 371.

as in new window
Length: 22 pages
Date of creation: 11 May 2010
Date of revision:
Handle: RePEc:wfo:wpaper:y:2010:i:371

Contact details of provider:
Postal: Arsenal Object 20, A-1030 Wien
Phone: (+43 1) 798 26 01-0
Fax: (+43 1) 798 93 86
Web page: http://www.wifo.ac.at/
More information through EDIRC

Related research

Keywords: financial crisis; business cycle; stabilisation policy; resilience;

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Karl Aiginger & Thomas Horvath & Helmut Mahringer, . "Why Labour Market Response Differed in the Great Recession: The Impact of Institutions and Policy," WIFO Working Papers 396, WIFO.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wfo:wpaper:y:2010:i:371

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.