Category Archives: multipliers

Helicopter money

Despite aggressive actions by central banks, many of the world’s economies are still stagnating and facing new shocks, leading to renewed calls for helicopter money as a serious policy prescription for countries like Japan and the U.K.. And, if things go badly, maybe the United States?
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Assessing the Counter-cyclical Macro Policies of the Great Recession

There are at least two ways of proceeding. One could repeat the following mantra endlessly:

[T]he government taxes or borrows the resources used to build infrastructure projects. Government spending crowds resources out from the rest of the economy. More federal spending comes at the expense of a smaller private sector.

These factors explain why the 2009 stimulus failed. So did Japan’s decade-long attempt to stimulate its economy through infrastructure projects. The Japanese wound up with massive debt, superhighways in underpopulated rural districts—and an anemic economy.

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“Fiscal Policy Re-Assessed”

From an article in the La Follette Policy Review:

In 2010 as the Great Recession was releasing its grip on the world’s economy, the United Kingdom’s newly elected Conservative-Liberal government embarked upon a policy of fiscal consolidation—higher taxes and drastically reduced spending—with the aim of stabilizing the ratio of government debt to gross domestic product (GDP) while spurring economic growth….

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