Fiscal multiplier/Tutorials: Difference between revisions
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imported>Nick Gardner No edit summary |
imported>Nick Gardner No edit summary |
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constrained in the financial markets, multipliers are larger than average; and 2) monetary policy is unable or | constrained in the financial markets, multipliers are larger than average; and 2) monetary policy is unable or | ||
unwilling to offset the deflationary effect of a consolidation | unwilling to offset the deflationary effect of a consolidation | ||
<ref>[http://ec.europa.eu/economy_finance/publications/economic_paper/2012/pdf/ecp460_en.pdf Jocelyn Boussard, Francisco de Castro and Matteo Salto: ''Fiscal Multipliers and Public Debt Dynamics in Consolidations'', European Commission, July 2012]</ref>. | <ref>[http://ec.europa.eu/economy_finance/publications/economic_paper/2012/pdf/ecp460_en.pdf Jocelyn Boussard, Francisco de Castro and Matteo Salto: ''Fiscal Multipliers and Public Debt Dynamics in Consolidations'', European Commission, July 2012]</ref>. | ||
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Christine Romer has argued that that it is "incredibly hard" to estimate the value of a multiplier because fiscal actions are often taken in response to other things happening in the economy, and separating the impact of those other factors from the impact of fiscal change very difficult. Failure to do so can result in [[omitted-variable bias]] resulting in an underestimate of the multiplier - an error that Ms Romer believes to be common. | |||
<ref>[http://elsa.berkeley.edu/~cromer/Written%20Version%20of%20Effects%20of%20Fiscal%20Policy.pdf Christina D. Romer: ''What do we know about the effects of fiscal policy?'', Lecture at Hamilton College, November 7, 2011]</ref> | <ref>[http://elsa.berkeley.edu/~cromer/Written%20Version%20of%20Effects%20of%20Fiscal%20Policy.pdf Christina D. Romer: ''What do we know about the effects of fiscal policy?'', Lecture at Hamilton College, November 7, 2011]</ref> | ||
Revision as of 06:23, 12 November 2012
Christine Romer has argued that that it is "incredibly hard" to estimate the value of a multiplier because fiscal actions are often taken in response to other things happening in the economy, and separating the impact of those other factors from the impact of fiscal change very difficult. Failure to do so can result in omitted-variable bias resulting in an underestimate of the multiplier - an error that Ms Romer believes to be common. [1]