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Estimated Macroeconomic Effects of the U.S. Stimulus Bill

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Abstract

This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of the U.S. stimulus bill passed in February 2009. The analysis has the advantage of taking into account many endogenous effects. Real U.S. output is estimated to be $554 billion larger when summed over the 12-year period 2009:1-2020:4 (0.29 percent of the total sum of output). The average number of jobs is 509 thousand larger (0.37 percent). There is some redistribution of output and employment away from 2012-2015. At the end of 2020 the federal government debt is larger by $637 billion in real terms (the debt/GDP ratio is larger by 3.19 percentage points), which may increase the risk of negative asset-market reactions.

Suggested Citation

  • Ray C. Fair, 2010. "Estimated Macroeconomic Effects of the U.S. Stimulus Bill," Cowles Foundation Discussion Papers 1756, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1756
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    1. Jordi Galí & Mark Gertler, 2007. "Macroeconomic Modeling for Monetary Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 25-46, Fall.
    2. Fair, Ray C, 1970. "The Estimation of Simultaneous Equation Models with Lagged Endogenous Variables and First Order Serially Correlated Errors," Econometrica, Econometric Society, vol. 38(3), pages 507-516, May.
    3. Robert E. Hall, 2009. "By How Much Does GDP Rise If the Government Buys More Output?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 183-249.
    4. Ray C. Fair, 2009. "Analyzing Macroeconomic Forecastability," Cowles Foundation Discussion Papers 1706, Cowles Foundation for Research in Economics, Yale University, revised Aug 2010.
    5. Ray C. Fair, 2010. "Possible Macroeconomic Consequences of Large Future Federal Government Deficits," NBER Chapters, in: Tax Policy and the Economy, Volume 25, pages 89-108, National Bureau of Economic Research, Inc.
    6. Ray Fair, 2009. "Analyzing Macroeconomic Forecastability," Yale School of Management Working Papers amz2443, Yale School of Management, revised 01 Oct 2009.
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    Cited by:

    1. Robert J. Barro & Charles J. Redlick, 2011. "Macroeconomic Effects From Government Purchases and Taxes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 51-102.
    2. Felix Reichling & Charles Whalen, 2015. "The Fiscal Multiplier and Economic Policy Analysis in the United States: Working Paper 2015-02," Working Papers 49925, Congressional Budget Office.
    3. Charles J. Whalen & Felix Reichling, 2015. "The Fiscal Multiplier And Economic Policy Analysis In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 33(4), pages 735-746, October.
    4. Ju Hyun Pyun & Dong-Eun Rhee, 2015. "Fiscal Multipliers During The Global Financial Crisis: Fiscal And Monetary Interaction Matters," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 207-220, January.
    5. Felix Reichling & Charles Whalen, 2012. "Assessing the Short-Term Effects on Output of Changes in Federal Fiscal Policies: Working Paper 2012-08," Working Papers 43278, Congressional Budget Office.

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    More about this item

    Keywords

    Stimulus effects; Government spending multipliers;

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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