The halo of victory: What Americans learned from World War I

Hugh Rockoff 04 October 2014

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World War I had important consequences for the structure of the US economy and its role in the world economy. This was especially true in the world of finance. The US transitioned from being a debtor nation to a creditor nation, and financial leadership moved from London to New York. But equally important were the lessons that Americans drew from the war. Although the war had much to teach, Americans tended, I will argue below, to learn too much from the war, drawing strong conclusions from a war in which the US was actively engaged for only 19 months.

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Topics:  Competition policy Economic history

Tags:  World War I, WWI, planning, rationing, New Deal, Great Depression, fiscal policy, monetary policy, stimulus, financial crisis, conscription, inflation, unemployment, price controls, Competition policy, antitrust, National Industrial Recovery Act

Eurozone recovery: there are no shortcuts

Roberto Perotti 13 September 2014

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The consensus is increasing that austerity has not worked – Europe stands on the edge of deflation and suffers from a deficit of demand. A recent VoxEU proposal (Giavazzi and Tabellini 2014) offers a solution that is widely shared on both sides of the Atlantic – all Eurozone countries should cut taxes simultaneously by 5% of GDP, and the ECB should buy the extra debt without sterilisation. This should be accompanied by a credible plan to reduce government spending in the future.

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Topics:  Macroeconomic policy Monetary policy

Tags:  austerity, eurozone, monetary policy, helicopter money, quantitative easing, QE, stimulus, fiscal consolidation, fiscal policy, spending cuts, fiscal sustainability, debt monetisation

Did the Cash for Clunkers stimulus programme reduce new vehicle spending?

Mark Hoekstra, Steve Puller, Jeremy West 03 September 2014

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Cash for Clunkers as stimulus

There has been significant debate about the role of various federal fiscal and monetary policies during recessions. Among the fiscal stimulus programmes, however, one seemed to hold particular promise. The Car Allowance Rebate System (CARS), better known as Cash for Clunkers, provided subsidies of up to $4,500 to households who scrapped their existing ‘clunker’ and purchased a new, fuel-efficient vehicle. Subsidies totalled nearly $3 billion.

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Topics:  Energy Environment Macroeconomic policy

Tags:  Cash for clunkers, scrapping subsidies, stimulus, environment, fuel efficiency, fiscal policy, cars, Auto industry

The effectiveness of fiscal and monetary stimulus in depressions

Barry Eichengreen, Kevin Hjortshøj O’Rourke, Miguel Almunia, Agustín S. Bénétrix, Gisela Rua 18 November 2009

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The debate over the effectiveness of stimulus rages on (Barro and Redlick 2009). Fewer than two years of data – that being the amount of time since monetary and fiscal measures to counter the crisis were put in place – are not enough to pin down the effects. And different theoretical models, for better or worse, predict different results. Strongly held priors rule the roost.

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Topics:  Macroeconomic policy

Tags:  Great Depression, global crisis, stimulus

Design and effectiveness of fiscal-stimulus programmes

Robert Barro, Charles Redlick 30 October 2009

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The global recession of 2008-09, one of the longest and deepest since the Great Depression, has made the efficacy of fiscal-stimulus packages one of the most prominent policy debates in economics today. These packages typically attempt to smooth out business-cycle fluctuations through a combination of increased government purchases of goods and services (to replace falling private demand) and tax cuts or rebates.

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Topics:  Macroeconomic policy

Tags:  fiscal policy, global crisis, stimulus, expenditure multiplier

Eurozone stimulus: A myth, some facts, and impact estimates

Volker Wieland 05 September 2009

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Fact: Fiscal stimulus packages put together by Eurozone governments were much smaller than the US package (American Recovery and Reinvestment Act, ARRA).

Announcements of discretionary fiscal measures by Eurozone governments only add up to about 1% of GDP in 2009 and a little less in 2010. The $787 billion stimulus by the US government amounts to over 5% of US GDP.

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Topics:  Macroeconomic policy

Tags:  monetary policy, fiscal policy, stimulus

Why we need not fear that a bigger stimulus will be counterproductive

J. Bradford DeLong 16 March 2009

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My favourite line from Jaws is uttered police chief Martin Brody (Roy Scheider) when he finally sees the shark: “You are going to need a bigger boat.”

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Topics:  Macroeconomic policy

Tags:  US, global crisis debate, stimulus, fear

A lot of bucks, but how much bang?

Richard Clarida 16 March 2009

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“We have involved ourselves in a colossal muddle, having blundered in control of a delicate machine, the workings of which we do not understand” - John Maynard Keynes, “The Great Slump of 1930”, published December 1930.

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Topics:  Global crisis

Tags:  fiscal policy, global financial crisis, global crisis debate, stimulus, multiplier

No ordinary recession

Axel Leijonhufvud 13 February 2009

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This is not an ordinary recession that differs from other recent episodes simply by being somewhat more severe. It differs in kind.

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Topics:  Global crisis

Tags:  recession, stimulus, deleverage

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