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Domestic And Cross-Border Consequences Of U.S. Macroeconomic Policies

  • BRYANT, R.C.
  • HELLIWELL, J.F.
  • HOOPER, P.

This paper reviews empirical evidence about the effects of changes in U.S. monetary policy and fiscal policy that has been accumulated during recent years in a series of collaborative research projects involving a variety of global macroeconometric models. The paper also considers, in particular, the consequences over the next five to six years for key U.S. and foreign economic variables of a significant U.S. fiscal contraction. The quantitative implications of both alternative fiscal spending and tax actions, and alternative treatments of expectations (adaptive versus rational) are analyzed. ; The results suggest that a phased-in fiscal contraction could reduce the level of output for up to several years, as well as the levels of interest rates, the dollar and the U.S. external deficit. The decline in the external deficit would be significantly smaller than the decline in the budget deficit, however. The negative effects on output would be mitigated to the extent that the phased-in contraction were anticipated (i.e., announced credibly in advance), to the extent that monetary policy were eased, or to the extent that the fiscal package emphasized spending cuts and personal taxes rather than corporate and excise taxes.

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Paper provided by Brookings Institution - Working Papers in its series Papers with number 68.

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Length: 90 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:fth:brooki:68
Contact details of provider: Postal: THE BROOKINGS INSTITUTION, 1775 MASSACHUSETTS AVE N.W. WASHINGTON D.C. 20036 U.S.A.
Web page: http://www.brook.edu/
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  1. Fromm, Gary & Klein, Lawrence R, 1973. "A Comparison of Eleven Econometric Models of the United States," American Economic Review, American Economic Association, vol. 63(2), pages 385-93, May.
  2. Gary Burtless, 1986. "The work response to a guaranteed income: a survey of experimental evidence," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 30, pages 22-59.
  3. John F. Helliwell & Tim Padmore, 1982. "Empirical Studies of Macroeconomic Interdependence," NBER Working Papers 1021, National Bureau of Economic Research, Inc.
  4. John F. Helliwell, 1988. "The Effects of Fiscal Policy on International Imbalances: Japan and the United States," NBER Working Papers 2650, National Bureau of Economic Research, Inc.
  5. Christ, Carl F, 1975. "Judging the Performance of Econometric Models of the U.S. Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(1), pages 54-74, February.
  6. D. Peter Dungan & Thomas A. Wilson, 1988. "Modelling Anticipated and Temporary Fiscal Policy Shocks in a Macro-econometric Model of Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 41-60, February.
  7. Edison, Hali J. & Marquez, Jaime R. & Tryon, Ralph W., 1987. "The structure and properties of the Federal Reserve Board Multicountry Model," Economic Modelling, Elsevier, vol. 4(2), pages 115-315, April.
  8. Frankel, Jeffrey A & Rockett, Katharine E, 1988. "International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model," American Economic Review, American Economic Association, vol. 78(3), pages 318-40, June.
  9. Jacob A. Frenkel & Morris Goldstein & Paul R. Masson, 1988. "International Coordination of Economic Policies: Scope, Methods, and Effects," NBER Working Papers 2670, National Bureau of Economic Research, Inc.
  10. Ishii, Naoko & McKibbin, Warwick & Sachs, Jeffrey, 1985. "The economic policy mix, policy cooperation, and protectionism: Some aspects of macroeconomic interdependence among the United States, Japan, and other OECD countries," Journal of Policy Modeling, Elsevier, vol. 7(4), pages 533-572.
  11. Boskin, Michael J, 1988. "Tax Policy and Economic Growth: Lessons from the 1980s," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 71-97, Fall.
  12. Brayton, Flint & Mauskopf, Eileen, 1985. "The federal reserve board MPS quarterly econometric model of the US economy," Economic Modelling, Elsevier, vol. 2(3), pages 170-292, July.
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