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Debt Hangover in the Aftermath of the Great Recession

Title:

Debt Hangover in the Aftermath of the Great Recession

Gomme, Paul, Auray, Stéphane and Eyquem, Aurélien (2019) Debt Hangover in the Aftermath of the Great Recession. Journal of Economic Dynamics and Control . ISSN 01651889 (In Press)

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Official URL: http://dx.doi.org/10.1016/j.jedc.2019.06.001

Abstract

Following the Great Recession, U.S. government debt levels exceeded 100% of output. We develop a macroeconomic model to evaluate the role of various shocks during and after the Great Recession; labor market shocks have the greatest impact on macroeconomic activity. We then evaluate the consequences of using alternative fiscal policy instruments to implement a fiscal austerity program to return the debt-output ratio to its pre-Great Recession level. Our welfare analysis reveals that there is not much difference between applying fiscal austerity through government spending, the labor income tax, or the consumption tax; using the capital income tax is welfare-reducing.

Divisions:Concordia University > Faculty of Arts and Science > Economics
Item Type:Article
Refereed:Yes
Authors:Gomme, Paul and Auray, Stéphane and Eyquem, Aurélien
Journal or Publication:Journal of Economic Dynamics and Control
Date:2019
Funders:
  • Projets Generique ANR 2015
  • Social Science and Humanities Research Council of Canada (SSHRC)
Digital Object Identifier (DOI):10.1016/j.jedc.2019.06.001
ID Code:985516
Deposited By: ALINE SOREL
Deposited On:19 Jun 2019 13:29
Last Modified:06 Jun 2021 01:00

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