The Council of Economic Advisers argues for a significant role for the Economic Recovery and Re-investment Act of 2009 in their third report on the topic here. Not surprisingly, they argue for a large effect. And economic theory can support this claim: when interest rates hit the zero lower bound, fiscal policy can be extremely effective at increasing output and welfare, as this recent paper by my colleagues shows. But there is a caveat. Once the zero lower bound is not binding, fiscal policy can be quite wasteful. More generally, we need theory that matches the salient features of reality, such as the spending response to tax rebates that I have studied (see these papers).
- #Boston #startups: want $1000 to take part in a research study by @MIT+@RiceUniversity researchers? check out esi.rice.edu 1 day ago
- #Boston #startups: want $1000 to take part in a research study by @MIT+@RiceUniversity researchers? check out esi.rice.edu 2 days ago
- AIG amusing diversions bailout bank regulation Bernanke CDS derivatives Dodd-Frank Act Euro Debt Crisis FDIC Fed Finance & the Public Interest financial crisis Financial Crisis Inquiry Commission financial reform Goldman Sachs GSEs Lehman Brothers MBS mortgages pensions public finance recession regulation SEC securitization TARP too big to fail Treasury Uncategorized