Fiscal Policy During Recessions and Recoveries Dr Ethan Ilzetzki - - PowerPoint PPT Presentation

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Sep 24, 2023 219 likes •447 views

Department of Economics and Centre For Macroeconomics public lecture Fiscal Policy During Recessions and Recoveries Dr Ethan Ilzetzki Centre for Macroeconomics, LSE Professor Wouter Den Haan Chair, LSE Suggested hashtag for Twitter users:

SLIDE 1

Suggested hashtag for Twitter users: #LSEecon

Fiscal Policy During Recessions and Recoveries

Department of Economics and Centre For Macroeconomics public lecture

Dr Ethan Ilzetzki

Centre for Macroeconomics, LSE

Professor Wouter Den Haan

Chair, LSE

SLIDE 2

Fiscal Policy

During Recessions and Recoveries

Public Lecture

Ethan Ilzetzki

SLIDE 3

Fiscal stimulus works…

“Textbook macroeconomics says [fiscal stimulus should] have been about three times as big as the stimulus we actually got, and would have been much more focused on spending rather than tax cuts. Would such a policy have worked? All the evidence

f the past five years says yes.”

Paul Krugman, NYT Sep 5, 2013

SLIDE 4

…or does it?

“Curiously, this plea for more fiscal expansion fails to

ffer any proof that … countries that chose more

budget stimulus have performed better than those that opted for more austerity.” Robert Barro, WSJ May 9, 2012

SLIDE 5

U.S. Unemployment Rate

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

US Unemployment Rate

SLIDE 6

U.S. Borrowing Rates

2 4 6 8 10 12 14 16 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

US 10-year Government Bond Yields (%)

SLIDE 7

U.S. Public Debt

20 30 40 50 60 70 80 90 100 1960 1962 1964 1966 1968 1970 1972 1974 1976 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Debt of U.S. Federal Government (% of GDP)

SLIDE 8

Range of Fiscal Multiplier Estimates Histogram Across Studies (Ramey, 2011)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5

SLIDE 9

Range of Fiscal Multiplier Estimates within a Study (Blanchard, Perotti, 2002)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5

SLIDE 10

The Decline in U.S Public Investment

2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

U.S. Public Investment (% of GDP)

SLIDE 11

Debt and Yields

2 4 6 8 10 12 14

Yie ld on 10- ye ar Gove r nme nt Bonds

APR, c risis pe ak

20 40 60 80 100 120 140 160

De bt/ GDP

Pe rc e nt, 2011

35 17.5 200 170

SLIDE 12

Deficit and Yields

2 4 6 8 10 12 14

Yie ld on 10- ye ar Gove r nme nt Bonds

APR, c risis pe ak

35 17.5

2 4 6 8 10 12 14

De ific it/ GDP

Pe rc e nt, 2011

SLIDE 13

Greek GDP growth and Budget Surplus

5 10 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Deficit Growth

SLIDE 14

Cyclicality of Fiscal Policy

0.2 0.4 0.6 0.8 1

Correlation bet betwee ween g gover ernment ex expen enditures es a and d GDP DP

(quarter erly, HP f filter ered ed, n net-of

f-inte

terest, c centra tral g govern rnment e t expenditu iture res)

Dev H

SLIDE 15

Fiscal Policy During the Crisis

High-income and Developing Economies

SLIDE 16

Fiscal Policy During the Crisis

High-income and Transition Economies

SLIDE 17

Public Spending and GDP in the UK

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 UK GDP (real index) UK Public Expenditure (£ index)

SLIDE 18

Public Spending and GDP in Lithuania

0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Lithuania GDP (real index) Lithuania Public Expenditure (LTL index)

SLIDE 19

Public Spending in the UK

Nominal and Real

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1998 2000 2002 2004 2006 2008 2010 2012

SLIDE 20

Public Spending in the UK

Nominal and Real

0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1998 2000 2002 2004 2006 2008 2010 2012 UK Public Expenditures UK REAL Public Expenditures

SLIDE 21

Fiscal Policy

During Recessions and Recoveries

Public Lecture

Ethan Ilzetzki

SLIDE 22

Suggested hashtag for Twitter users: #LSEecon

Fiscal Policy During Recessions and Recoveries

Department of Economics and Centre For Macroeconomics public lecture

Dr Ethan Ilzetzki

Centre for Macroeconomics, LSE

Professor Wouter Den Haan

Chair, LSE