Tag Archives: Fiscal stimulus

The Krugman Multiplier is too big

Paul Krugman is a very active blogger. Almost every time he writes a post on his New York Times blog, there are several comments made around the economic blogosphere. And sometimes Krugman will respond to a few of the comments made, and then it sets off further comments, and so on. It is a Krugman Blog Multiplier. I posit that it needs no formal empirical evidence to establish that it is way above 1. Way above. In this New Year’s post I’ll show a recent example, and argue why this multiplier is too high, and why one should not always “exploit” large multipliers. Probably one of the issues on which … Continue reading

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Temporary and Permanent Ricardian Confusion: Going Comfortably Numb

Spurred by the heated debates about the need for fiscal stimulus in the US, the issue of Ricardian Equivalence has taken center stage in the economic blogging sphere recently. While it is an impossible task to identify any exact line of events on the net (and possible also irrelevant), this round appears to have been initiated by an article by Justin Yifu Lin (pdf), Chief Economist of the World Bank, who got criticized here by a balanced Antonio Fatás. Fatás notes, among other things, that Lin’s fears that fiscal stimulus could be caught by the “Ricardian trap” (i.e., neutralized by offsetting increased private savings) are unwarranted. While Lin’s endorsement of … Continue reading

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The Importance of Capital Theory? Supply-side Economics With a Vengeance

From Brad DeLong’s weblog (where it came from Mark Toma), I was directed back to Paul Krugman’s NYT blog, where he comments on a 2008 blog post by Robert P. Murphy on the Austrian capital theory. I am not an expert on Austrian economics, so it is interesting to read a piece by one I guess is a prominent figure within that school. My guess is based on visiting the web-site mises.org, where one sees that Murphy is/or has been teaching at the Ludwig von Mises Institute, and I reckon they wouldn’t let him do that, if he wasn’t somewhat representative of the Austrian school. Also, on his own blog, … Continue reading

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The Fiscal Multiplier Wrestling Marathon

Welcome to the academic wrestling match of the recent years. In the left corner, Paul Krugman (with assistance from Bradford DeLong)! In the right corner, John Cochrane (with assistance from Eugene Fama)! They will fight over the size of the Fiscal Multiplier in a match where any trick may, can, and will be used. Both are heavyweights in the economics profession with one of them even with a Nobel Prize to his credit! This is a match not to miss. Well, this is actually not funny at all. But one of the most important questions in macroeconomics, how effective is expansionary fiscal policy in a recession, have recently been subject … Continue reading

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