The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War

Lee Ohanian

American Economic Review, 1997, vol. 87, issue 1, 23-40

Abstract: During World War II, government expenditures were financed primarily by issuing debt. During the Korean War, expenditures were financed almost exclusively by higher taxes, reflecting President Truman's preference for balanced budgets. This paper evaluates quantitatively the economic effects of the different policies used to finance these two wars. Counterfactual experiments are used to explore the implications of financing World War II like the Korean War, and financing the Korean War like World War II. The author finds that using a Korean War policy during World War II would have resulted in much lower output and welfare relative to the actual policy. Copyright 1997 by American Economic Association.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (128)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819970 ... O%3B2-J&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:87:y:1997:i:1:p:23-40

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().