Fiscal tightening is endangering global recovery says UN organisation

The Trade and Development Report 2011: Post-Crisis Policy Challenges in the World Economy, released yesterday by the United Nations Conference on Trade and Development (UNCTAD), argues that a shift from fiscal stimulus towards fiscal tightening is self-defeating, especially in the most developed economies which were severely hit by the financial crisis. In such a situation, a restrictive fiscal policy may … Continue reading

Posted by Nigel Tree | Comments Off on Fiscal tightening is endangering global recovery says UN organisation

Government stimulus spending and the multiplier

“Our research shows no evidence of a Keynesian ‘multiplier’ effect.” So, says Harvard professor Robert J.Barrow, who together with Charles J.Redlick, wrote a piece in The Wall Street Journal last Thursday. According to Barrow and Redlick, government stimulus packages are predicated on the view that expenditure multipliers are greater than one. To estimate these potential multiplier values they examined US … Continue reading

Posted by Nigel Tree | Comments Off on Government stimulus spending and the multiplier

US fiscal policy and the multiplier effect

Traditional Keynesian theory suggests that a change in government expenditure on real GDP has an effect greater than one-for-one. In other words as a government pumps money into the economy this will put unemployed resources to work which will have a one-for-one effect initially. However, as households receive additional income they will spend some of this and thus there will … Continue reading

Posted by Nigel Tree | Comments Off on US fiscal policy and the multiplier effect