New Keynesian versus Old Keynesian Government Spending Multipliers

John F. Cogan (), Tobias Cwik (), John B. Taylor () and Volker Wieland ()
Additional contact information
John F. Cogan: Stanford University - The Hoover Institution on War, Revolution and Peace, HHMB Rm 347, Stanford, CA 94305, USA., http://www.hoover.org/
Tobias Cwik: Goethe University Frankfurt, Grüneburgplatz 1, Uni-Pf. 77, D-60323 Frankfurt am Main, Germany., http://www.wiwi.uni-frankfurt.de/
John B. Taylor: Stanford University, Stanford, CA 94305, USA., http://www.stanford.edu/
Volker Wieland: University of Frankfurt, P.O. Box 94, Mertonstrasse 17, D-60054 Frankfurt am Main, Germany., http://www.wiwi.uni-frankfurt.de/

No 1090, Working Paper Series from European Central Bank

Abstract: Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically-estimated and widely-cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small with GDP and employment effects only one-sixth as large. JEL Classification: C52, E62.

Keywords: Fiscal Multiplier; New Keynesian Model; Fiscal Stimulus; Government Spending; Macroeconomic Modeling. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fdg and nep-mac
Date: 2009-09
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