Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain

Nicholas Crafts and Terence C. Mills ()
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Terence C. Mills: Loughborough University

No 31, Working Papers from European Historical Economics Society (EHES)

Abstract: We report estimates of the fiscal multiplier for interwar Britain based on quarterly data, time-series econometrics, and ‘defense news’. We find that the government expenditure multiplier was in the range 0.5 to 0.8, much lower than previous estimates. The scope for a Keynesian solution to recession was much lower than is generally supposed. We do find that rearmament gave a substantial boost to real GDP after 1935 but this was because the private sector responded to news of massive future defense spending and does not imply that the multiplier effect of temporary public works programs would have been large.

Keywords: defense news; multiplier; public works; rearmament (search for similar items in EconPapers)
JEL-codes: E62 N14 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2012-11
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (4)

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https://ehes.org/wp/EHES_No31.pdf (application/pdf)

Related works:
Journal Article: Rearmament to the Rescue? New Estimates of the Impact of “Keynesian” Policies in 1930s' Britain (2013)
Working Paper: Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain (2013)
Working Paper: Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain (2013)
Working Paper: Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain (2012)
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