Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?

By V. Ramey. Journal of Economic Perspectives, 2019

399 citations recorded by the source corpus.

This paper takes stock of what we have learned from the “Renaissance” in fiscal research in the ten years since the financial crisis. I first discuss the new innovations in methodology and various strengths and weaknesses of the main approaches to estimating fiscal multipliers. Reviewing the estimates, I come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range, 0.6 to 1 for spending multipliers and -2 to -3 for tax change multipliers. However, I identify economic circumstances in which multipliers lie outside those ranges. Finally, I review the debate on whether multipliers were higher for the 2009 Obama stimulus spending in the United States or for fiscal consolidations in Europe.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/92e385fda2e9a0bc814e3fef75531b567d4998aa

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Citations in the corpus

Global Waves of Debt: Causes and Consequences (2021, background): “There is a large literature on estimates of the output effects (fiscal multipliers) of additional government spending or tax cuts (Huidrom et al. 2016, 2019; Ramey 2019).”
General Equilibrium Effects of Cash Transfers: Experimental Evidence from Kenya (2019, background): “While recent papers have focused primarily on estimation (Ramey 2019), a few have examined the relationship between fiscal multipliers and welfare in the context of micro-founded models, emphasizing that multipliers need not be sufficient statistics for welfare or (consequently) for optimal policy…”
Inference in Structural Vector Autoregressions identified with an external instrument (2020, methodology): “3 Recent applications of the external-instrument approach to SVAR identification and estimation include Stock and Watson (2012), Mertens and Ravn (2013, 2014), Gertler and Karadi (2015), and Mertens and Montiel Olea (2018).”
Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change? (2020, background): “…that the economic success of fiscal stimulus is strongly affected by two attributes: the speed at which the stimulus delivers real-world impact; and the short-and long-run economic multiplier, or return for every dollar of expenditure (Freedman et al., 2009, Coenen et al., 2012, Ramey, 2019).”