Great recession, slow recovery and muted fiscal policies in the US

Alice Albonico, Alessia Paccagnini and Patrizio Tirelli

Journal of Economic Dynamics and Control, 2017, vol. 81, issue C, 140-161

Abstract: This paper reconsiders the role of macroeconomic shocks and policies in determining the Great Recession and the subsequent recovery in the US. The Great Recession was mainly caused by a large demand shock and by the ZLB on the interest rate policy. In contrast with previous findings, the subsequent jobless recovery is explained by the ZLB effect. We estimate a fraction of Non-Ricardian households which is close to 50%, and obtain comparatively large fiscal multipliers. However we cannot detect a significant contribution of fiscal policies in stabilizing the US economy. For instance, the 2007–2009 large increase in expenditure-to-GDP ratios was apparently determined by the adverse non-policy shocks that caused the recession.

Keywords: DSGE; Limited asset market participation; Bayesian estimation; US economy; Business cycle; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: C11 C13 C32 E21 E32 E37 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Working Paper: Great Recession, Slow Recovery and Muted Fiscal Policies in the US (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:81:y:2017:i:c:p:140-161

DOI: 10.1016/j.jedc.2016.10.012

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