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Great Recession, Slow Recovery and Muted Fiscal Policies in the US

Listed author(s):
  • Alice Albonico
  • Alessia Paccagnini
  • Patrizio Tirelli

This paper reconsiders the role of macroeconomic shocks and policies in determining the Great Recession and the subsequent recovery in the US. The Great Recession was mainly caused by a large demand shock and by the ZLB on the interest rate policy. In contrast with previous findings, the subsequent jobless recovery is explained by the ZLB effect. We estimate a fraction of non-Ricardian households which is close to 50%, and obtain comparatively large fiscal multipliers. However we cannot detect a significant contribution of fiscal policies in stabilizing the US economy. For instance, the 2007-2009 large increase in expenditure-to-GDP ratios was apparently determined by the adverse non-policy shocks that caused the recession.

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File URL: http://hdl.handle.net/10197/7609
File Function: First version, 2016
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Paper provided by School of Economics, University College Dublin in its series Working Papers with number 201602.

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Length: 39 pages
Date of creation: Mar 2016
Handle: RePEc:ucn:wpaper:201602
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UCD, Belfield, Dublin 4

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Web page: http://www.ucd.ie/economics

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