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)
Preview |
Text (application/pdf)
2MBGomme 2019.pdf - Accepted Version Available under License Creative Commons Attribution Non-commercial No Derivatives. |
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: |
|
| 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 |
References:
S. Auray, A. Eyquem, P. Gomme. A tale of tax policies in open economies, International Economic Review, 57 (4) (2016), pp. 1299-1333R. Barnichon. Building a composite Help-Wanted Index, Economics Letters, 109 (3) (2010), pp. 175-178
H. Bohn. The behavior of U.S. public debt and deficits, Quarterly Journal of Economics, 113 (3) (1998), pp. 949-963
P. Brinca, V.V. Chari, P.J. Kehoe, E. McGrattan. Accounting for business cycles, Taylor J.B., Uhlig H. (Eds.), Handbook of Macroeconomics, vol. 2A, Elsevier, Amsterdam (2016), pp. 1013-1063
L.J. Christiano, M.S. Eichenbaum, M. Trabandt. Understanding the great recession, American Economic Journal: Macroeconomics, 7 (1) (2015), pp. 110-167
G. Corsetti, K. Kuester, A. Meier, G.J. Müller. Debt consolidation and fiscal stabilization of deep recessions, American Economic Review, 100 (2) (2010), pp. 41-45
S.J. Davis, R.J. Faberman, J.C. Haltiwanger. The establishment-level behavior of vacancies and hiring, Quarterly Journal of Economics, 128 (2) (2013), pp. 531-580
P.A. Diamond, A. Şahin. Shifts in the beveridge curve, Research in Economics, 69 (1) (2015), pp. 18-25
M.W.L. Elsby, B. Hobijn, A. Şahin. The labor market in the great recession, Brookings Papers on Economic Activity, 41 (1) (2010), pp. 1-69
M.W.L. Elsby, B. Hobijn, A. Sahin, R.G. Valletta. The labor market in the great recession – an update to september 2011, Brookings Papers on Economic Activity (Fall) (2011)
C.J. Erceg, J. Lindé. Fiscal consolidation in a currency union: Spending cuts vs. tax hikes, Journal of Economic Dynamics and Control, 37 (2) (2013), pp. 422-445
R. Fair, J. Taylor. Solution and maximum likelihood estimation of dynamic nonlinear rational expectations models, Econometrica, 51 (4) (1983), pp. 1169-1185
F. Furlanetto, N. Groshenny. Mismatch shocks and unemployment during the great recession, Journal of Applied Econometrics, 31 (7) (2016), pp. 1197-1212
P. Gomme, B. Ravikumar, P. Rupert. The return to capital and the business cycle, Review of Economic Dynamics, 14 (2) (2011), pp. 262-278
P. Gomme, P. Rupert. Theory, measurement, and calibration of macroeconomic models, Journal of Monetary Economics, 54 (2) (2007), pp. 460-497
B. Hobijn, A. Şahin. Beveridge curve shifts across countries since the great recession, IMF Economic Review, 61 (4) (2013), pp. 566-600
F.E. Kydland, C.E. Zarazaga. Fiscal sentiment and the weak recovery from the great recession: A quantitative exploration, Journal of Monetary Economics, 79 (1) (2016), pp. 109-125
E.G. Mendoza, A. Razin, L.L. Tesar. Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption, Journal of Monetary Economics, 34 (3) (1994), pp. 297-323
E.G. Mendoza, L.L. Tesar, J. Zhang. Saving Europe?: The Unpleasant Arithmetic of Fiscal Austerity in Integrated Economies, NBER Working Papers 20200, National Bureau of Economic Research (2014)
D.T. Mortensen, E. Nagypál. More on unemployment and vacancy fluctuations,Review of Economic Dynamics, 10 (3) (2007), pp. 327-347
S. Nukic. Fiscal Consolidation and Employment Loss, MPRA Paper 60224, University Library of Munich, Germany (2014)
N. Petrosky-Nadeau. Credit, vacancies and unemployment fluctuations, Review of Economic Dynamics, 17 (2) (2014), pp. 191-205
M.O. Ravn, H. Uhlig. On adjusting the hodrick-prescott filter for the frequency of observations, Review of Economics and Statistics, 84 (2) (2002), pp. 371-380
J. Rothstein. Unemployment insurance and job search in the Great Recession, Brookings Papers on Economic Activity (2011), pp. 143-210
L. Sala, U. Söderstrom, A. Trigari. Structural and cyclical forces in the labor market during the great recession: Cross-country evidence, NBER International Seminar on Macroeconomics 2012, National Bureau of Economic Research, Inc. NBER Chapters (2012), pp. 345-404
R. Shimer. The cyclicality of hires, separations and job-to-job transitions, Federal Reserve Bank of St. Louis Review, 87 (4) (2005), pp. 493-507
All items in Spectrum are protected by copyright, with all rights reserved. The use of items is governed by Spectrum's terms of access.
Repository Staff Only: item control page
Download Statistics
Download Statistics