Net Fiscal Stimulus During the Great Recession

46 Pages Posted: 14 Feb 2011 Last revised: 8 May 2022

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics

Gurnain Kaur Pasricha

International Monetary Fund

Date Written: February 2011

Abstract

This paper studies the patterns of fiscal stimuli in the OECD countries propagated by the global crisis. Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. The USA is ranked at the bottom third in terms of the rate of expansion of the consolidated government consumption and investment of the 28 countries in sample. Contrary to historical experience, emerging markets had strongly countercyclical policy during the period immediately preceding the Great Recession and the Great Recession. Many developed OECD countries had procyclical fiscal policy stance in the same periods. Federal unions, emerging markets and countries with very high GDP growth during the pre-recession period saw larger net fiscal stimulus on average than their counterparts. We also find that greater net fiscal stimulus was associated with lower flow costs of general government debt in the same or subsequent period.

Suggested Citation

Aizenman, Joshua and Pasricha, Gurnain Kaur, Net Fiscal Stimulus During the Great Recession (February 2011). NBER Working Paper No. w16779, Available at SSRN: https://ssrn.com/abstract=1759851

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

Gurnain Kaur Pasricha

International Monetary Fund ( email )

United States

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