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Fiscal Policy and the Great Recession in the Euro Area

Listed author(s):
  • Gunter Coenen
  • Roland Straub
  • Mathias Trabandt

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.71
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 3 (May)
Pages: 71-76

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:71-76
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  1. Cwik, Tobias & Wieland, Volker, 2010. "Keynesian government spending multipliers and spillovers in the euro area," Working Paper Series 1267, European Central Bank.
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  16. Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
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