Category Archives: multipliers

The Heritage Foundation Confuses Me

The Heritage Foundation critiques the CEA assessment of the stimulus. In WebMemo #2799, Dr. Campbell writes:

The CEA’s method, in brief, compared a statistical forecast of the economy based on historical patterns (no stimulus) with the actual economic results in 2009. On this basis, it claims that there are 2 million more jobs in the economy than otherwise would have been the case. The CEA then concludes that this difference between this statistical forecast and the actual results were the effect of the stimulus.

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Counterfactuals and the Stimulus, Again

And some lessons from the 1930’s for the 2000’s

John Taylor returns to the topic of how much impact the stimulus package has had on output. The heart of the argument is summarized by his extension of a graph presented in the NYT (and reproduced in this post).

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Multipliers, Reviewed

Mark Thoma has assembled a set of useful discussions of multipliers. Econbrowser has added a handy new category “multipliers”, that compiles entries on the topic. In addition, Ethan Ilzetzki, Enrique G. Mendoza and Carlos A. Vegh provide a very useful cross-country (including emerging market economy) survey here and here [pdf].

The ARRA’s Progress

…and a Rejoinder to Posner.

The CEA Analysis of ARRA’s Impact

Yesterday, the Council of Economic Advisers released the first of its mandated reports on the impact of the ARRA on economic activity. Based upon a variety of approaches (VAR, multiplier based), it concludes:

“…our multiplier analysis and estimates from a wide range of private and public sector forecasters confirm the estimates from the statistical projection analysis. There is broad agreement that the ARRA has added between 2 and 3 percentage points to baseline real GDP growth in the second quarter of 2009 and around 3 percentage points in the third quarter.

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I Am Even More Confused Now…

By Richard Posner’s math…On August 25th he wrote, regarding Dr. Romer’s August 6 speech:

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Richard Posner Misunderstands Numbers, Yet Again

Richard Posner displays his failure to understand the difference between expenditures (reported on Recovery.com) and tax rebates (not reported online, but have to be estimated).

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Basic Math for the Math Challenged

Since Richard Posner has decided to exhibit his math skills again, I thought it useful to work through some math to see how one can obtain back-of-the-envelope estimates for the stimulus package. I’ll use Mr. Posner’s numbers to illustrate.

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Honesty, Dishonesty and Competence: Comments on Posner’s Critique

Richard Posner has a critique of public intellectuals who work in the public sphere (with special reference to Christina Romer), either in government service, or in journalistic fora. Mark Thoma and Brad Delong have already made clear the (many) points at which Mr. Posner has gone astray. Parenthetically, I’ll add that I wonder about the analytical abilities of anybody who lumps Philip Glass (!) and Elliott Carter together into the highbrow music category (see page 18 in his tome Public Intellectuals: A Study of Decline (1991)). More substantively, I have a few of additional observations, some of which are amplifications of Brad Delong’s points.

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Multipliers, under Differing Monetary Regimes

Here’s another installment in a series attempting to move the discussion from “my estimate vs. your estimate” (or “prior”, as the case may be) [1] [2] [3] [4] [5] [6] to something more constructive (and hopefully more nuanced). From the conclusion to “Expectations and Fiscal Stimulus” by Troy Davig and Eric M. Leeper:

This paper has embedded estimated Markov-switching rules for U.S. monetary and fiscal policy into an otherwise conventional calibrated DSGE model with nominal rigidities to deliver some quantitative predictions of the impacts of government
spending increases. When monetary and fiscal policy regimes vary — from active monetary/passive fiscal to passive monetary/active fiscal to doubly passive to doubly active — government spending multipliers can vary widely. An increase in government spending of $1 in present value raises output by $0.80 in present value under
[Active Money/Passive Fiscal] AM/PF, while it raises output by as much as $1.80 in present value when monetary policy is passive. In our simple model, this translates into a decrease in consumption of $0.20 in present value under AM/PF, but an increase in consumption of about $0.80 in present value under passive monetary policy.

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Are Unemployment Statistics Meaningless? Are Spillover Effects Zero?

Casey Mulligan rebuts my post asserting slack in the economy by posing the scenario “Construction Workers Teaching Kindergarten” (Note: Mulligan’s blog is down; here is an alternative link currently working – 8/2/09). He writes:

Econbrowser now claims* that the stimulus bill can be effective, because unemployment rates are high (whatever that means) in health care and education. Let’s take a look at employment changes Dec 2007 – June 2009 (millions) by industry:

Total nonfarm payrolls: -6.5

Construction: -1.3

Manufacturering: -1.9

Education and Health: +0.7

How exactly is fiscal policy going to create 3.5 million jobs by primarily hiring people in education and health? I see only two scenarios, both absurd and/or dishonest:

He argues these two scenarios are: (1) “The construction workers become kindergarten teachers” or (2) “The people in construction and manufacturing stay unemployed.”

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