Net Fiscal Stimulus During the Great Recession

17 Pages Posted: 18 Jul 2013

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Gurnain Kaur Pasricha

Government of Canada - Bank of Canada

Date Written: August 2013

Abstract

This paper studies the patterns of government expenditure stimuli among Organisation for Economic Co‐operation and Development (OECD) countries during the Great Recession (2007–2009). Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. Of the 28 countries in the sample, the USA is ranked among the bottom third in terms of the rate of expansion of consolidated government consumption and investment expenditures. Contrary to historical experience, emerging markets had strongly countercyclical policy during the period immediately preceding the Great Recession and the Great Recession itself. Federal unions, emerging markets and countries with very high gross domestic product (GDP) growth during the pre‐recession period saw larger net fiscal stimulus on average than their counterparts. We also find that greater net fiscal stimulus was associated with lower flow costs of general government debt in the same or subsequent period.

Suggested Citation

Aizenman, Joshua and Pasricha, Gurnain Kaur, Net Fiscal Stimulus During the Great Recession (August 2013). Review of Development Economics - Special Issue. Guest Editor: Zhihao Yu, Vol. 17, Issue 3, pp. 397-413, 2013. Available at SSRN: https://ssrn.com/abstract=2295272 or http://dx.doi.org/10.1111/rode.12039

Joshua Aizenman

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gurnain Kaur Pasricha

Government of Canada - Bank of Canada ( email )

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