Who Are You Going to Believe?

Professor Casey Mulligan says (and yesterday unequivocally reiterates) the stimulus program would not stimulate the economy. The nonpartisan CBO says otherwise:

…CBO estimates that in the fourth quarter of calendar year 2009, ARRA’s policies:

  • Raised real GDP by between 1.5 percent and
    3.5 percent,
  • Lowered the unemployment rate by between 0.5 percentage
    points and 1.1 percentage points,
  • Increased the number of people employed by between
    1.0 million and 2.1 million, and
  • Increased the number of full-time-equivalent jobs by
    1.4 million to 3.0 million compared with what those
    amounts would have been otherwise (see Table 1).

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Net Fiscal Stimulus

From the abstract to “On the ease of overstating the fiscal stimulus in the US, 2008-9”, by (my sometime coauthor) Joshua Aizenman and Gurnain Kaur Pasricha:

This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. …

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Exports: Productivity, Factor Proportions, and Policy Implications

Bringing New Research Developments to Bear

The President’s goal of doubling exports elicited a lot of discussion, and skepticism. In a previous blog post, I examined the prospects of accomplishing this goal from a macroeconomic perspective. However, a few discussions I’ve had with journalists have reminded me that the frontier of international trade theory has moved considerably over the past few years, even as the much of the economic commentary remains mired in the older models. In this respect, the most recent edition of the Economic Report of the President was extremely welcome, as it brought to bear recent innovations in the trade literature.

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In Search of…Crowding Out

There are various definitions of crowding out. There’s crowding out in the financial markets, and crowding out of actual economic activity. In order for crowding out in the financial markets to translate into a reduction of the interest sensitive components of aggregate demand, one needs to see an impact on interest rates. So, what is happening to real (inflation adjusted) interest rates?

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The Demand for Stimulus Funds

From Bloomberg today:

…more than 100 congressional Republicans and several Democrats who, after voting against the stimulus bill, wrote Transportation Secretary Ray LaHood seeking money from $1.5 billion the plan set aside for local road, bridge, rail and transit grants. The $862 billion American Recovery and Reinvestment Act passed last year with no Republican votes in the House and three in the Senate.

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