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The Fall and Rise of K eynesian Fiscal Policy
Author(s) -
Auerbach Alan J.
Publication year - 2012
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/j.1748-3131.2012.01228.x
Subject(s) - fiscal policy , economics , debt , recession , fiscal multiplier , government (linguistics) , macroeconomics , fiscal union , monetary economics , economic policy , government spending , welfare , market economy , linguistics , philosophy
This paper reviews the recent evolution of thinking and evidence regarding the effectiveness of activist fiscal policy, including how policy multipliers might vary with respect to economic conditions. Like many other countries that were hit by the “ G reat R ecession,” the USA responded initially with active fiscal policy measures. But a more positive view of fiscal intervention appears to have developed earlier in the decade, and estimated decision rules confirm that there was an increase in policy activism. While this positive view has been tested by the unclear effects of fiscal policy during the G reat R ecession, recent evidence does suggest that fiscal policy may be especially effective in recession. Fiscal policy activism has also been tempered by recent concerns about growing government debt, a development which potentially might also undercut the effectiveness of expansionary fiscal policy.