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Why Hasn’t the US Economic Stimulus Been More Effective? The Debate on Tax and Expenditure Multipliers

Author

Listed:
  • F. Gerard Adams

    (University of Pennsylvania, Department of Economics (Emeritus))

  • Byron Gangnes

    (University of Hawaii, Department of Economics)

Abstract

Recent dissatisfaction with the impact of expenditure stimulus on economic activity in the United States, along with the results of academic research, have once again raised questions about the effectiveness of fiscal stimulus policies and about whether stimulus to a recessionary economy should be in the form of tax cuts or expenditure increases. This paper considers alternative methods for evaluating the impacts of stimulus policy strategies. We discuss conceptual challenges involved in effectiveness measurement, and we review alternative empirical approaches applied in recent studies. We then present our own estimates of policy multipliers based on simulations of the IHS Global Insight model of the US economy. Based on this review and analysis, we address the question of why recent US stimulus programs have not been more effective.

Suggested Citation

  • F. Gerard Adams & Byron Gangnes, 2010. "Why Hasn’t the US Economic Stimulus Been More Effective? The Debate on Tax and Expenditure Multipliers," Working Papers 201010, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201010
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_10-10.pdf
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    Citations

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    Cited by:

    1. Kirchner, Markus & Wijnbergen, Sweder van, 2016. "Fiscal deficits, financial fragility, and the effectiveness of government policies," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 51-68.
    2. Rizwanul Islam, 2018. "Macroeconomic Policy and Employment: A Development Perspective," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(3), pages 427-451, September.

    More about this item

    Keywords

    United States (US) recession and recovery; fiscal and monetary policy; tax and expenditure multipliers; econometric model forecast simulation.;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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