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Why Hasn’t the US Economic Stimulus Been More Effective?

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  • F. Gerard Adams
  • Byron Gangnes

Abstract

Recently questions have been raised about the effectiveness of fiscal stimulus policies, and about whether stimulus to a recessionary economy should be in the form of tax cuts or expenditure increases. This paper evaluates alternative empirical approaches to measuring the impact of fiscal policy and presents new results based on simulations of a large econometric model of the US economy. The US economic stimulus has not been more effective because, large as it is, it has not been sufficient to offset the impact of a serious recession and because it has been phased in slowly. Multiplier simulations and other studies suggest that the recession would have been considerably more serious in the absence of the economic stimulus programme.

Suggested Citation

  • F. Gerard Adams & Byron Gangnes, 2010. "Why Hasn’t the US Economic Stimulus Been More Effective?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 11(4), pages 111-130, October.
    • Handle: RePEc:wej:wldecn:446
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    Cited by:

    1. Mario Crucini & Nam Vu, 2021. "Did the American Recovery and Reinvestment Act Help Counties Most Affected by the Great Recession?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 42, pages 264-282, October.
    2. Kirchner, Markus & Wijnbergen, Sweder van, 2016. "Fiscal deficits, financial fragility, and the effectiveness of government policies," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 51-68.
    3. Rizwanul Islam, 2018. "Macroeconomic Policy and Employment: A Development Perspective," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(3), pages 427-451, September.

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