Great Recession, Slow Recovery and Muted Fiscal Policies in the US

Alice Albonico, Alessia Paccagnini and Patrizio Tirelli

No 201602, Working Papers from School of Economics, University College Dublin

Abstract: This paper reconsiders the role of macroeconomic shocks and policies in determining the Great Recession and the subsequent recovery in the US. The Great Recession was mainly caused by a large demand shock and by the ZLB on the interest rate policy. In contrast with previous findings, the subsequent jobless recovery is explained by the ZLB effect. We estimate a fraction of non-Ricardian households which is close to 50%, and obtain comparatively large fiscal multipliers. However we cannot detect a significant contribution of fiscal policies in stabilizing the US economy. For instance, the 2007-2009 large increase in expenditure-to-GDP ratios was apparently determined by the adverse non-policy shocks that caused the recession.

Keywords: DSGE; Limited asset market participation; Bayesian estimation; US economy; Business cycle; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: C11 C13 C32 E21 E32 E37 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-03
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://hdl.handle.net/10197/7609 First version, 2016 (application/pdf)

Related works:
Journal Article: Great recession, slow recovery and muted fiscal policies in the US (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:201602

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