There is no consensus on the effectiveness of government spending as a measure for boosting output. This column suggests that increasing government spending is highly effective exactly when it is most needed – when the economy is experiencing a deep recession. But the finding does not imply a one-size-fits-all recommendation. There are potential dangers in increasing spending in countries whose level of debt might be perceived as unsustainable.
Giovanni Caggiano, Efrem Castelnuovo, Tuesday, June 23, 2015 - 00:00
Valerie Ramey, Sarah Zubairy, Friday, January 23, 2015 - 00:00
Joseph Stiglitz, Thursday, May 9, 2013 - 00:00
The world has seen a hundred financial crises in the past three decades. In this column, Nobelist Joe Stiglitz argues that we could have done much more to prevent this crisis and to mitigate its effects. Looking ahead, we can do much more to prevent the next one. This is a chance to revolutionise flawed economic models, and perhaps exit from an interminable cycle of crises.
David Romer, Thursday, May 9, 2013 - 00:00
Pre-2008 macroeconomic thinking largely ignored the financial sector as a source of shocks. This column argues that such shocks are not rare, so we need a fundamental rethink of the financial system and macroeconomic policy frameworks. We must think about strong measures that would minimise the chances of anything similar happening again. The reforms considered to date are too small and too meek.
Olivier Blanchard, Thursday, May 9, 2013 - 00:00
Macroeconomics was challenged by the Global Crisis. In this column, one of the world’s leading macroeconomists provides his take on the highlights of the IMF’s recent conference. He concludes by noting that the conference set a clear research agenda for the future.
George A. Akerlof, Thursday, May 9, 2013 - 00:00
Economists did very badly in predicting the crisis. But in this column, Nobelist George Akerlof argues that the economic policies post-crisis have been close to what a sensible ‘economist-doctor’ would have ordered. The lesson for the future is that good economics and common sense have worked well. We have had trial and success. We must keep this in mind with policy going forward.
Emi Nakamura, Jón Steinsson, Sunday, October 2, 2011 - 00:00
A major question facing many governments in the rich world today is whether we should try to stimulate the economy by increasing government spending. This column exploit variation in military spending across US states and identifies a fiscal multiplier of around 1.5. It then suggests that aggregate fiscal stimulus should have large output multipliers when the economy is at the zero lower bound.
Giancarlo Corsetti, Saverio Simonelli, Antonio Acconcia, Monday, April 4, 2011 - 00:00
Few things divide the economics profession more than this question: How much economic activity does $1 of government spending generate? This column provides a new angle. Looking at local councils in Italy between 1990 and 1999, it examines variation in budgets due to the removal of funds by central government if mafia involvement is suspected. It finds that the fiscal multiplier starts at 1.4 and rises to 2.0.
Enrique G. Mendoza, Carlos A. Vegh , Ethan Ilzetzki, Thursday, October 1, 2009 - 00:00
How much stimulus does spending provide? This column says that fiscal multipliers are much weaker in countries that have high debt, lower income, flexible exchange rates, and greater international openness. Policymakers should consider these characteristics when evaluating the benefits of any fiscal stimulus package.