• 5 minutes Covid-19 logarithmic growth
  • 8 minutes Why Trump Is Right to Re-Open the Economy
  • 12 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 14 minutes China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 8 hours Its going to be an oil bloodbath
  • 2 mins US Shale Resilience: Oil Industry Experts Say Shale Will Rise Again
  • 1 hour Trump will meet with executives in the energy industry to discuss the impact of COVID-19
  • 2 hours Marine based energy generation
  • 4 hours What If ‘We’d Adopted A More Conventional Response To This Epidemic?’
  • 15 hours The Most Annoying Person You Have Encountered During Lockdown
  • 12 hours Trafigura CEO Weir says, "We will see 30% to 35% drop in demand". That amounts to 35mm bbls/day glut ! OPEC+ 10 mm cut won't fix it. It's a DEMAND problem.
  • 18 hours Which producers will shut in first?
  • 6 hours Real Death Toll In CCP Virus May Be 12X Official Toll
  • 16 hours Cpt Lauren Dowsett
  • 22 mins TRUMP pushing Hydroxychloroquine + Zpak therapy forward despite FDA conservative approach. As he reasons, "What have we got to lose ?"
  • 13 hours Today 127 new cases in US, 99 in China, 778 in Italy
  • 17 hours Washington doctor removed from his post, over covid

Breaking News:

IEA: OPEC Can’t Save The Oil Market

Trump Tweet Sends Oil Soaring 25%

Trump Tweet Sends Oil Soaring 25%

Oil prices spiked on Thursday…

Oil Giants Turn On Each Other As Crude Prices Plummet

Oil Giants Turn On Each Other As Crude Prices Plummet

Various larger and smaller oil…

Temporary vs. Permanent Increases in Government Spending

Temporary vs. Permanent Increases in Government Spending

Not long ago Paul Krugman wrote:

To a first approximation, in other words, the effect of current fiscal policy — whether stimulus or austerity — an [on?] the actions of future governments is zero.

He makes further points at the link, although there is not a citation to the literature. I thought we should look at the evidence a little more closely. Some of it contradicts Krugman as read literally, though it is not all bad news for his larger point.

Here is an abstract from Brian Goff:

In spite of Peacock and Wiseman’s 1961 NBER study demonstrating the “displacement effect”, simplistic theoretical and empirical distinctions between temporary and permanent spending are common. In this paper, impulse response functions from ARMA models as well as Cochrane’s non-parametric method support Peacock and Wiseman’s conclusion by showing 1) government spending in the aggregate displays strong persistence to temporary shocks, 2) simple decomposition methods intended to yield a “temporary” spending series have a weak statistical foundation, and 3) persistence in spending has increased during this century. Also, as a basic “fact” of government spending behavior, the displacement effect lends support to interest group and bureaucracy models of government spending growth.

There is persistence to spending, although this study does not create a category for stimulus spending per se, however that concept might be defined.

Click here to read the full article



Join the discussion | Back to homepage




Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News