Temporary Vs. Permanent Increases In Government Spending


Not long ago Paul Krugman wrote: To a first approximation, in other words, the effect of current fiscal policy — whether stimulus or austerity — an [on?] the actions of future governments is zero. He makes further points at the link, although there is not a citation to the literature. I thought we should look at the evidence a little more closely. Some of it contradicts Krugman as read literally, though it is not all bad news for his larger point. Here is an abstract from Brian Goff: In spite of Peacock and Wiseman’s 1961 NBER…

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