Debt Hangover in the Aftermath of the Great Recession

Stéphane Auray, Aurélien Eyquem and Paul Gomme

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Abstract: Following the Great Recession, U.S. government debt levels exceeded 100% of output. We develop a macroeconomic model to evaluate the role of various shocks during and after the Great Recession; labor market shocks have the greatest impact on macroeconomic activity. We then evaluate the consequences of using alternative fiscal policy instruments to implement a fiscal austerity program to return the debt-output ratio to its pre-Great Recession level. Our welfare analysis reveals that there is not much difference between applying fiscal austerity through government spending, the labor income tax, or the consumption tax; using the capital income tax is welfare-reducing.

Keywords: Fiscal policies; tax reforms; government debt; government deficits (search for similar items in EconPapers)
Date: 2019-06-25
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Citations: View citations in EconPapers (1)

Published in Journal of Economic Dynamics and Control, 2019, 105, pp.107-133. ⟨10.1016/j.jedc.2019.06.001⟩

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Related works:
Journal Article: Debt hangover in the aftermath of the Great Recession (2019)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2018)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2018)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2016)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2016)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-02176531

DOI: 10.1016/j.jedc.2019.06.001

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