Estimating the Impact of Austerity During the Great Recession Using the Hicksian Super-Multiplier
Presentation Type
Poster & Oral Presentation
College
College of Social and Behavioral Sciences
Major
Economics
Session Number
1
Location
RM 216
Juror Names
Moderator: Dr. Marc Fudge
Start Date
5-21-2015 2:00 PM
End Date
5-21-2015 2:20 PM
Abstract
The 2007-2008 recession in the United States was one of the most severe economic downturns since the Great Depression. Standard Keynesian economic analysis calls for government spending to stimulate the economy in such “slumps”. The size of the stimulus, in turn, depends crucially on what macroeconomists refer to as the multiplier, which is the degree to which government spending filters through the rest of the economy to boost spending and job growth. We use the concept of the supermultiplier, first developed by Hicks (1950) and later by Serrano (1995) and most recently employed in an analysis of fiscal policy in the Great Depression by Perry and Vernengo (2013), to analyze the effects of the 2009 American Reinvestment and Recovery Act. Finally, we employ our estimations in a novel way to conclude that a larger “counterfactual” stimulus package would have quickened the pace of economic recovery after the Great Recession.
Estimating the Impact of Austerity During the Great Recession Using the Hicksian Super-Multiplier
RM 216
The 2007-2008 recession in the United States was one of the most severe economic downturns since the Great Depression. Standard Keynesian economic analysis calls for government spending to stimulate the economy in such “slumps”. The size of the stimulus, in turn, depends crucially on what macroeconomists refer to as the multiplier, which is the degree to which government spending filters through the rest of the economy to boost spending and job growth. We use the concept of the supermultiplier, first developed by Hicks (1950) and later by Serrano (1995) and most recently employed in an analysis of fiscal policy in the Great Depression by Perry and Vernengo (2013), to analyze the effects of the 2009 American Reinvestment and Recovery Act. Finally, we employ our estimations in a novel way to conclude that a larger “counterfactual” stimulus package would have quickened the pace of economic recovery after the Great Recession.
