Abstract

http://ssrn.com/abstract=1356152
 
 

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New Keynesian versus Old Keynesian Government Spending Multipliers


John F. Cogan


Stanford University - The Hoover Institution on War, Revolution and Peace; National Bureau of Economic Research (NBER)

Tobias J. Cwik


Board of Governors of the Federal Reserve System

John B. Taylor


Stanford University

Volker Wieland


University of Frankfurt

February 2009

Rock Center for Corporate Governance at Stanford University Working Paper No. 47
ECB Working Paper No. No. 1090

Abstract:     
Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically-estimated and widely-cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small with GDP and employment effects only one-sixth as large and with private sector employment impacts likely to be even smaller.

Number of Pages in PDF File: 22

Keywords: fiscal multiplier, new Keynesian model, fiscal stimulus, government spending, macroeconomic modeling

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Date posted: March 9, 2009  

Suggested Citation

Cogan, John F. and Cwik, Tobias J. and Taylor, John B. and Wieland, Volker, New Keynesian versus Old Keynesian Government Spending Multipliers (February 2009). Rock Center for Corporate Governance at Stanford University Working Paper No. 47; ECB Working Paper No. No. 1090. Available at SSRN: http://ssrn.com/abstract=1356152

Contact Information

John F. Cogan (Contact Author)
Stanford University - The Hoover Institution on War, Revolution and Peace ( email )
HHMB Rm 347
Stanford, CA 94305
United States
(650) 723-2585 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Tobias J. Cwik
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue
Washington, DC 20551
United States
HOME PAGE: http://www.federalreserve.gov/econresdata/tobias-cwik.htm
John B. Taylor
Stanford University ( email )
Stanford, CA 94305
United States
Volker Wieland
University of Frankfurt ( email )
House of Finance
Grüneburgplatz 1
Frankfurt am Main, D-60323
Germany
+49 69 798 33805 (Phone)
+49 69 798 33907 (Fax)
HOME PAGE: http://www.volkerwieland.com
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