research

Paper: What are the Effects of Fiscal Policy Shocks

Link to paper

Andrew Mountford and Harald Uhlig recently released a working paper called, What are the Effects of Fiscal Policy Shocks.  The paper looks at the affects of various fiscal policies on GDP, which is an important topic given the current Congressional debate on the need for further stimulus spending. 

The three were: deficit spending;   deficit financed tax cut; and balance budget spending expansion.  Their conclusion was deficit financed tax cuts provided the highest short-run returns to GDP—the opposite of the fiscal stimulus passed by Congress in February.

© 2009 Tax Policy Forum.