fiscal_multipliers   4

Larry Summers
The Permanent Effects of Fiscal Consolidations
Antonio Fatás, Lawrence H. Summers
NBER Working Paper No. 22374
Issued in June 2016
NBER Program(s):   EFG
The global financial crisis has permanently lowered the path of GDP in all advanced economies. At the same time, and in response to rising government debt levels, many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates. We empirically explore the connections between these two facts by extending to longer horizons the methodology of Blanchard and Leigh (2013) regarding fiscal policy multipliers. Our results provide support for the presence of strong hysteresis effects of fiscal policy. The large size of the effects points in the direction of self-defeating fiscal consolidations as suggested by DeLong and Summers (2012). Attempts to reduce debt via fiscal consolidations have very likely resulted in a higher debt to GDP ratio through their long-term negative impact on output.
austerity  fiscal_policy  macroeconomics  NBER  paper  fiscal_multipliers  economic_theory  Great_Recession  hysterisis  paywall 
november 2016 by dunnettreader
Marco Di Maggio
The Importance of Unemployment Insurance as an Automatic Stabilizer
Marco Di Maggio, Amir Kermani
NBER Working Paper No. 22625
Issued in September 2016
NBER Program(s):   EFG   LS   PE
We assess the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks. Using a local labor market design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%. Consistent with a local demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits. Our analysis finds that the local fiscal multiplier of unemployment insurance expenditure is approximately 1.9.
paywall  unemployment_insurance  consumer_demand  unemployment  paper  NBER  demand-side  recessions  fiscal_multipliers  automatic_stabilizers  fiscal_policy 
october 2016 by dunnettreader
Eggertsson, Mehrotra, Singh & Summers - A Contagious Malady? Open Economy Dimensions of Secular Stagnation | NBER June 2016
Gauti B. Eggertsson, Neil R. Mehrotra, Sanjay R. Singh, Lawrence H. Summers - Conditions of secular stagnation - low interest rates, below target inflation, and sluggish output growth - characterize much of the global economy. We consider an overlapping generations, open economy model of secular stagnation, and examine the effect of capital flows on the transmission of stagnation. In a world with a low natural rate of interest, greater capital integration transmits recessions across countries as opposed to lower interest rates. In a global secular stagnation, expansionary fiscal policy carries positive spillovers implying gains from coordination, and fiscal policy is self-financing. Expansionary monetary policy, by contrast, is beggar-thy-neighbor with output gains in one country coming at the expense of the other. Similarly, we find that competitiveness policies including structural labor market reforms or neomercantilist trade policies are also beggar-thy-neighbor in a global secular stagnation.
economic_theory  interest_rates  stagnation  economic_growth  OECD_economies  paywall  capital_flows  paper  international_finance  global_economy  contagion  monetary_policy  FX-rate_management  international_political_economy  competition-interstate  fiscal_policy  fiscal_multipliers  trade-policy  Labor_markets  austerity  competiveness-labor  wages  labor_standards 
july 2016 by dunnettreader

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austerity  automatic_stabilizers  capital_flows  competition-interstate  competiveness-labor  consumer_demand  contagion  demand-side  economic_growth  economic_theory  fiscal_policy  fx-rate_management  global_economy  great_recession  hysterisis  interest_rates  international_finance  international_political_economy  kevin_drum  labor_markets  labor_standards  macroeconomics  monetary_policy  nber  oecd_economies  paper  paywall  recessions  stagnation  stimulus_package  trade-policy  unemployment  unemployment_insurance  wages 

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