Working Paper: CEPR ID: DP7615
Authors: Volker Wieland
Abstract: Recent evaluations of the fiscal stimulus packages enacted in 2009 in the United States and Europe such as Cogan, Cwik, Taylor and Wieland (2009) and Cwik and Wieland (2009) suggest that the GDP effects will be modest due to crowding-out of private consumption and investment. Corsetti, Meier and Mueller (2009a,b) argue that spending shocks are typically followed by consolidations with substantive spending cuts, which enhance the short-run stimulus effect. This note investigates the implications of this argument for the estimated impact of recent stimulus packages and the case for discretionary fiscal policy.
Keywords: discretionary fiscal policy; fiscal multiplier; fiscal stimulus; government spending; macroeconomic modeling; new keynesian model
JEL Codes: C52; E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Anticipated spending cuts (H56) | current consumption and investment (E20) |
| Anticipated spending cuts (H56) | GDP effects (F62) |
| Expectations of drastic spending cuts (H68) | household expectations (D19) |
| Government announcements (E60) | expectations of spending cuts (H68) |
| Fiscal stimulus packages (E62) | GDP effects (F62) |