fiscal policy during recessions and recoveries d ethan ...€¦ · paul krugman, nyt sep 5, 2013...
TRANSCRIPT
Suggested hashtag for Twitter users: #LSEecon
Fiscal Policy During Recessions and Recoveries
Department of Economics and Centre For Macroeconomics public lecture
Dr Ethan Ilzetzki Centre for Macroeconomics, LSE
Professor Wouter Den HaanChair, LSE
Fiscal Policy During Recessions and Recoveries
Public Lecture
Ethan Ilzetzki
Fiscal stimulus works…
“Textbook macroeconomics says [fiscal stimulus should] have been about three times as big as the stimulus we actually got, and would have been much more focused on spending rather than tax cuts. Would such a policy have worked? All the evidence of the past five years says yes.”
Paul Krugman, NYT Sep 5, 2013
…or does it?
“Curiously, this plea for more fiscal expansion fails to offer any proof that … countries that chose more budget stimulus have performed better than those that opted for more austerity.”
Robert Barro, WSJ May 9, 2012
U.S. Unemployment Rate
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
US Unemployment Rate
U.S. Borrowing Rates
0
2
4
6
8
10
12
14
16
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
US 10-year Government Bond Yields (%)
U.S. Public Debt
20
30
40
50
60
70
80
90
100
1960
1962
1964
1966
1968
1970
1972
1974
1976
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Debt of U.S. Federal Government (% of GDP)
Range of Fiscal Multiplier Estimates Histogram Across Studies (Ramey, 2011)
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5
Range of Fiscal Multiplier Estimates within a Study (Blanchard, Perotti, 2002)
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5
The Decline in U.S Public Investment
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
U.S. Public Investment (% of GDP)
Debt and Yields
0
2
4
6
8
10
12
14Yield on 10-year
Government Bonds APR, crisis peak
0
20
40
60
80
100
120
140
160 Debt/GDP Percent, 2011
35 17.5 200 170
Deficit and Yields
0
2
4
6
8
10
12
14Yield on 10-year
Government Bonds APR, crisis peak
35 17.5
0
2
4
6
8
10
12
14 Deificit/GDP Percent, 2011
Greek GDP growth and Budget Surplus
-10
-5
0
5
10
15
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Deficit Growth
Cyclicality of Fiscal Policy
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1Correlation between government expenditures and GDP (quarterly, HP filtered, net-of-interest, central government expenditures)
Dev H
Fiscal Policy During the Crisis High-income and Developing Economies
Fiscal Policy During the Crisis High-income and Transition Economies
Public Spending and GDP in the UK
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
UK GDP (real index) UK Public Expenditure (£ index)
Public Spending and GDP in Lithuania
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Lithuania GDP (real index)Lithuania Public Expenditure (LTL index)
Public Spending in the UK Nominal and Real
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1998 2000 2002 2004 2006 2008 2010 2012
Public Spending in the UK Nominal and Real
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1998 2000 2002 2004 2006 2008 2010 2012
UK Public ExpendituresUK REAL Public Expenditures
Fiscal Policy During Recessions and Recoveries
Public Lecture
Ethan Ilzetzki
Suggested hashtag for Twitter users: #LSEecon
Fiscal Policy During Recessions and Recoveries
Department of Economics and Centre For Macroeconomics public lecture
Dr Ethan Ilzetzki Centre for Macroeconomics, LSE
Professor Wouter Den HaanChair, LSE