Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?
This paper takes stock of what we have learned from the “Renaissance” in fiscal research in the ten years since the financial crisis. I first summarize the new innovations in methodology and discuss the various strengths and weaknesses of the main approaches. Reviewing the estimates, I come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range, 0.6 to 1 for spending multipliers and -2 to -3 for tax change multipliers. However, I identify economic circumstances in which multipliers lie outside those ranges. I conclude by reviewing the debate on whether multipliers were higher on the stimulus spending in the U.S. and the fiscal consolidations in Europe.
Prepared for the Journal of Economic Perspectives. I am grateful for helpful comments from Alberto Alesina, Gabriel Chodorow-Reich, Martin Eichenbaum, Carlo Favero, Mark Gertler, Francesco Giavazzi, Gordon Hanson, Daniel Leff Yaffe, Karel Mertens, Maury Obstfeld, Timothy Taylor, Linda Tesar, Sarah Zubairy, and participants at the July 2018 NBER Conference “Global Financial Crisis @10.” The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Valerie A. Ramey, 2019. "Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?," Journal of Economic Perspectives, vol 33(2), pages 89-114. citation courtesy of