Heritage Foundation on fiscal stimulus

The Heritage Foundation has published a great picture.

Previous Catallaxy coverage here, here and here.
(HT: Tim Andrews)

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9 Responses to Heritage Foundation on fiscal stimulus

  1. entropy

    I would be interested in knowing who the two exceptions are. OZ and China?

  2. JC

    What an interesting chart this is. Funny how all the Keynesianistas only give monetary policy almsot next to no recognition despite it being the largest monetary infusion in world history.

  3. Taylor

    Don’t we need to know the earlier decline in private investment, consumption and exports for each country to make sense of this picture?

  4. TerjeP (say Taya)

    I give monetary very little regard when it comes to influencing growth. The objective of monetary policy ought to be a singular focus on low inflation (and no significant deflation). Get it wrong and it can impair growth but other than that I think it is mostly irrelevant. I think it was relevant in the USA during the GFC because the collapse of credit risked a deflation spike but that is consistent with what monetary policy ought to be focused on.

    The notion that monetary policy can stimulate demand is in fact a very Keynesian notion. It is why in the 70s we had so much inflation. Using the Philips curve as a guide Keynesians thought printing money would create demand and lower unemployment. Of course it’s a crock but that’s what they thought.

    The problem they have in the USA is that unlike Australia the central bank is far from being singular in it’s monetary objectives. The FED thinks it can manage inflation, inflate stock markets, lower unemployment, optimised the exchange rate and achieve any number of other objectives simply using interest rates and the printing press. At least one could be lead to believe so given their rhetoric.

  5. jC

    The notion that monetary policy can stimulate demand is in fact a very Keynesian notion.

    Yea right Terje. Take Australian interest rates down to zero and then come back and tell us it doesn’t stimulate. Alternatively take them up to 10% and see the economy crash into a heap.

    The reason we’re in this mess in the first place is because the Fed and the ECB screwed up at the beginning of the decade and left interest rates too low thereby causing a real estate boom in the US and all sorts of other distortions in Europe.

    If you think monetary policy doesn’t cause changes to GDP then you’ve really discovered a revolutionary part of economics no one knew until now.

    Congratulations, you will be a Nobel prize winner.

  6. daddy dave

    If you think monetary policy doesn’t cause changes to GDP then you’ve really discovered a revolutionary part of economics no one knew until now.
    .
    That’s not what he said.
    What he said was the notion that it can stimulate demand is a Keynsian notion. Dropping interest rates is kind of like a doctor who’s had his finger jammed into your liver, then he takes it out and claims he’s given you pain relief.

  7. Butterfield, Bloomfiled & Bishop

    Sinkers take yourself along to a decent University and sit in a second year macroeconomic lecture.

    There you will hear how a weakened econmy can:
    A) increase a cyclical budget deficit
    B) increase the structural budget deficit

    Both happen without ANY change in Government policy.

    As an example from memory

    Ireland faced with the GFC decided on austerity. it targeted to reduce expenditure as a % of GDP from 34 to 32%. In fact it rose to 46%
    It structural budget deficit rose from being diddly squat to a little over 7% of GDP.

    this paper paper to have made similar mistakes you made with OECD data.

    Monetary policy is redundant at present. In most countries interest rates would be negative if they could be set there.
    QE has done a little to offset this but not a lot.
    Glen Rudebusch as usual has written clearly on this re the US

  8. jC

    Yea Homer and like we ask you for a good example of successful implementation of Keynes policies you either remain silent or send us to 30 Nazi Germany.

    Go away

  9. Butterfield, Bloomfiled & Bishop

    that is typical of you Forrest parade your ignorance and stupidity.

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