New Keynesian versus old Keynesian government spending multipliers: A comment

Andrew Hughes Hallett, Ansgar Rannenberg and Sven Schreiber

No 2014/6, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: Cogan et al. (2009, 2010) claim that the stimulus package passed by the United States Congress in February 2009 had a multiplier far below one. However, the stimulus’ multiplier strongly depends on the assumed monetary policy response. Based on official statements from the Fed chairman, the economic outlook, past behavior of the FOMC, optimal policy considerations, and financial market expectations, we find that in February 2009 a period of monetary accommodation of three years would have been a reasonable prediction. This implies that an appropriate real time assessment of the stimulus’ effects would have been more optimistic than Cogan et al.’s.

Keywords: Obama fiscal stimulus; fiscal multiplier; interest rate forecasts (search for similar items in EconPapers)
JEL-codes: E37 E47 E58 E62 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20146

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