Fiscal Policy Can Reduce Unemployment: But There is a Less Costly and More Effective Alternative

Roger E. A. Farmer

NBER Working Paper No. 15021
Issued in May 2009

---- Acknowledgements -----

This paper was prepared for the November 13-14, 2009 meeting of the Carnegie-Rochester Conference Series on Public Policy, "Fiscal Policy in an Era of Unprecedented Budget Deficits." The author gratefully acknowledges the support of NSF grant 0720839. I wish to thank Katrin Assenmacher-Wesche, Amy Brown, Larry Christiano, Anton Cheremukhin, Alain Delacroix, Martin Ellison, Peter Howitt, Masanori Kashiwagi, James Nason, Roberto Perotti, Valery Ramey and Andrew Scott for their comments on an early version of this paper and on a related paper that influenced the final draft. Thanks also to Leland E. Farmer for research assistance. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.

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