Natural Experiments in Macroeconomics

104 Pages Posted: 25 Mar 2015 Last revised: 10 Aug 2015

See all articles by Nicola Fuchs-Schundeln

Nicola Fuchs-Schundeln

Goethe University Frankfurt

Tarek A. Hassan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: April 2015

Abstract

A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the permanent income hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.

Keywords: Permanent Income Hypothesis, Fiscal Multiplier, Institutions, Social Ties, Networks, Social Structure, Civic Capital, Trust, Multiple Equilibria

JEL Classification: C1, C9, E21, E62, H31, O11, O14, O43, O50

Suggested Citation

Fuchs-Schundeln, Nicola and Hassan, Tarek Alexander, Natural Experiments in Macroeconomics (April 2015). Fama-Miller Working Paper. Available at SSRN: https://ssrn.com/abstract=2583876 or http://dx.doi.org/10.2139/ssrn.2583876

Nicola Fuchs-Schundeln

Goethe University Frankfurt ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Tarek Alexander Hassan (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/tarek.hassan/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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