Wednesday, September 22, 2010

Effects of Fiscal Stimulus

Roberts asks:

1) If the recession ended just as the stimulus money was about to spent, did the stimulus accomplish anything?

2) If unemployment is still this high, did the stimulus accomplish anything?

But if you believe in expectations driving the effects of monetary stimulus, it's not hard to imagine a similar effect working to answer question 1. As to question 2, the claim will be that expected stimulus stopped the recession, so things could always have been worse. And yet, with unemployment continuing to increase, there's probably only one thing to say:

The recession is dead. Long live the recession.

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