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New Keynesian Versus Old Keynesian Government Spending Multipliers

Author

Listed:
  • John Cogan

    (Hoover Institute, Stanford University)

  • Tobias Cwik

    (Goethe University Frankfurt)

  • John Taylor

    (Department of Economics, Stanford University)

  • Volker Wieland

    (Goethe University Frankfurt)

Abstract

Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically-estimated and widely-cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small with GDP and employment effects only one-sixth as large and with private sector employment impacts likely to be even smaller. Creation Date: 2009-02 Revision Date:

Suggested Citation

  • John Cogan & Tobias Cwik & John Taylor & Volker Wieland, "undated". "New Keynesian Versus Old Keynesian Government Spending Multipliers," Discussion Papers 08-030, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:08-030
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    File URL: http://www-siepr.stanford.edu/repec/sip/08-030.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Keynesianism; fiscal policy; fiscal stimulus; multiplier;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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