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Debt hangover in the aftermath of the Great Recession

Stéphane Auray, Aurélien Eyquem and Paul Gomme

Journal of Economic Dynamics and Control, 2019, vol. 105, issue C, 107-133

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; Labor market (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2019)
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2018) Downloads
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2018) Downloads
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017) Downloads
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017) Downloads
Working Paper: Debt Hangover in the Aftermath of the Great Recession (2017) Downloads
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) Downloads
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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