TY  - JOUR
AU  - McGrattan,Ellen R.
AU  - Ohanian,Lee E.
TI  - Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12130
PY  - 2006
Y2  - April 2006
UR  - http://www.nber.org/papers/w12130
L1  - http://www.nber.org/papers/w12130.pdf
N1  - Author contact info:
Ellen McGrattan
Research Department
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
Tel: 612/204-5523
Fax: 612/204-5515
E-Mail: erm@mcgrattan.mpls.frb.fed.us

Lee E. Ohanian
8283 Bunche Hall
UCLA, Department of Economics
Box 951477
Los Angeles, CA  90095
Tel: 310/825-0979
Fax: 310/825-9528
E-Mail: ohanian@econ.ucla.edu
AB  - There is much debate about the usefulness of the neoclassical growth model for assessing the macro-economic impact of fiscal shocks. We test the theory using data from World War II, which is by far the largest fiscal shock in the history of the United States. We take observed changes in fiscal policy during the war as inputs into a parameterized, dynamic general equilibrium model and compare the values of all variables in the model to the actual values of these variables in the data. Our main finding is that the theory quantitatively accounts for macroeconomic activity during this big fiscal shock.
ER  -