Fiscal stimulus and the promise of future spending cuts: A comment

Volker Wieland

No 2009/26, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Recent evaluations of the fiscal stimulus packages recently enacted in the United States and Europe such as Cogan, Cwik, Taylor and Wieland (2009) and Cwik and Wieland (2009) suggest that the GDP effects will be modest due to crowding-out of private consumption and investment. Corsetti, Meier and Mueller (2009a,b) argue that spending shocks are typically followed by consolidations with substantive spending cuts, which enhance the short-run stimulus effect. This note investigates the implications of this argument for the estimated impact of recent stimulus packages and the case for discretionary fiscal policy.

Keywords: Fiscal Multiplier; Fiscal Stimulus; Discretionary Fiscal Policy; New Keynesian Model; Crowding-out; Government Spending; Macroeconomic Modelling (search for similar items in EconPapers)
JEL-codes: C32 G14 G17 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:200926

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