The effectiveness of government spending in deep recessions: a New Keynesian perspective
As the recent recession unfolded, policymakers in the U.S. and abroad employed both monetary and fiscal stabilization tools to help mitigate the downturn. One of the tools that can be used by fiscal policymakers is to actively purchase more goods and services: the idea being that the government’s demand can offset the weak demand by households and firms. For such a policy to be effective, one needs to know the extent to which government spending can stimulate the economy. One of the models frequently used by economists who study business cycles suggests that the answer depends very much on the extent to which monetary policy can be employed to stabilize the economy. In “The Effectiveness of Government Spending in Deep Recessions: A New Keynesian Perspective,” (226 KB, 7 pages) Keith Kuester reviews the literature on the effectiveness of government spending during severe recessions.
Volume (Year): (2011)
Issue (Month): Q3 ()
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- Cogan, John F. & Cwik, Tobias J. & Taylor, John B. & Wieland, Volker, 2009.
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CEPR Discussion Papers
7624, C.E.P.R. Discussion Papers.
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- Lawrence J. Christiano & Martin Eichenbaum & Sergio Rebelo, 2010.
"When is the government spending multiplier large?,"
FRB Atlanta CQER Working Paper
2010-01, Federal Reserve Bank of Atlanta.
- Corsetti, Giancarlo & Kuester, Keith & Meier, André & Müller, Gernot, 2010.
"Debt consolidation and fiscal stabilization of deep recessions,"
CEPR Discussion Papers
7649, C.E.P.R. Discussion Papers.
- Giancarlo Corsetti & Keith Kuester & André Meier & Gernot J. Müller, 2010. "Debt Consolidation and Fiscal Stabilization of Deep Recessions," American Economic Review, American Economic Association, vol. 100(2), pages 41-45, May.
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- Keith Sill, 2011. "Inflation dynamics and the New Keynesian Phillips curve," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 17-25.
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