Can Government Purchases Stimulate the Economy?¶
Ramey, V. A. (2011). Can Government Purchases Stimulate the Economy?. Journal of Economic Literature.
Cited by¶
2 citations across 2 artifacts.
Each citation links to the sentence it supports in the citing article.
Domain-specific¶
- Aggregate Demand
- The policy logic was exactly the AD-AS one: with the economy far below capacity and prices sticky, an autonomous injection through G and tax-induced C would raise real output and employment rather than merely prices, its effect scaled by the spending multiplier (whose size became the central empirical dispute)
This sourceSurvey of the government-spending multiplier concluding that for a temporary, deficit-financed increase in purchases the multiplier is probably between 0.8 and 1.5.
Supported in partVerified against the publisher's abstract
“I assess the likely range of multiplier values for the experiment most relevant to the stimulus package debate: a temporary, deficit-financed increase in government purchases.”
- The policy logic was exactly the AD-AS one: with the economy far below capacity and prices sticky, an autonomous injection through G and tax-induced C would raise real output and employment rather than merely prices, its effect scaled by the spending multiplier (whose size became the central empirical dispute)
- Fiscal Multiplier
- Once each round also leaks to taxes and imports, and forward-looking households trim spending in anticipation of future taxes, the effective per-round retention falls well below 0.8 and the realized net multiplier is far smaller — often near or below 1.5
This sourceRamey's survey of theory, aggregate US and cross-locality estimates, concluding that the multiplier for a temporary deficit-financed increase in government purchases is probably between 0.8 and 1.5.
SupportedVerified against the source
- Once each round also leaks to taxes and imports, and forward-looking households trim spending in anticipation of future taxes, the effective per-round retention falls well below 0.8 and the realized net multiplier is far smaller — often near or below 1.5
Verification¶
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