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How Quickly Does Fiscal Policy Get Implemented?
The response to the 2007-09 recession can provide a sense of timing when it comes to implementing fiscal policy.
Journal Article
Possible Fiscal Policies for Rare, Unanticipated, and Severe Viral Outbreaks
What should guide a fiscal authority in conducting macroeconomic policy in the event of a severe viral outbreak?
Early Impact of States Halting Federal Jobless Benefits
Continuing claims for state unemployment insurance benefits appear to have fallen faster in states that have stopped accepting federal pandemic benefits.
Working Paper
Decomposing the Government Transfer Multiplier
We estimate the local, spillover and aggregate causal effects of government transfers on personal income. We identify exogenous changes in federal transfers to residents at the state-level using legislated social security cost-of-living adjustments between 1952 and 1974. Each effect is measured as a multiplier: the change in personal income in response to a one unit change in transfers. The local multiplier, i.e., the effect of own-state transfers on own-state income holding fixed other state's income, at a four-quarter horizon is approximately 3.4. The cross-state spillover multiplier is ...
Decomposing an Economic Impact into Its Local and Spillover Effects
An analysis of cost-of-living increases for Social Security shows a strong direct effect on income within a state where the recipient lives but little evidence of a spillover effect in other states.
Working Paper
Was the Post-Lockdown Inflation Surge Mainly Supply Driven?
By December 2022, the price level of personal consumption expenditures on core goods and services had risen more than 10 percent over the preceding two years. This paper studies consumption price and quantity changes at the disaggregate level using a generalization of Shapiro’s (2024) inflation decomposition method. Categories with inflation and consumption growth innovations that positively co-move are labeled as experiencing current demand-pull inflation. Negative co-movement in the two innovations indicates current supply-push inflation. Category inflation is then decomposed into supply ...
Working Paper
The Phillips Curve's and Relative Phillips Curve's Slopes: Why So Different?
I estimate the effect of labor market tightness on wage inflation from 2004-2019 using aggregate data and a hybrid New Keynesian Phillips curve. The Phillips curve slope, i.e., the effect of a unit increase in the vacancy-unemployment ratio on inflation, is about 3.4 percentage points. Then, I estimate the model using the corresponding panel-level data with a time-fixed-effect regression: The resulting regional (i.e., relative) Phillips curve slope is about 0.7. This large difference between the two slopes is robust to controlling for various measures of inflation expectations and for supply ...
Journal Article
So, Why Didn’t the 2009 Recovery Act Improve the Nation’s Highways and Bridges?
Although the American Recovery and Reinvestment Act of 2009 (the Recovery Act) provided nearly $28 billion to state governments for improving U.S. highways, the highway system saw no significant improvement. For example, relative to the years before the act, the number of structurally deficient or functionally obsolete bridges was nearly unchanged, the number of workers on highway and bridge construction did not significantly increase, and the annual value of construction put in place for public highways barely budged. The author shows that as states spent Recovery Act highway grants, many ...
Journal Article
Examining Long and Variable Lags in Monetary Policy
Economists sometimes use the term ‘long and variable lags’ in relation to monetary policy. An analysis looks at what they are and what might cause them.
Working Paper
The 2009 recovery act: stimulus at the extensive and intensive labor margins
This paper studies the effect of government stimulus spending on a novel aspect of the labor market: the differential impact of spending on the total wage bill versus employment. We analyze the 2009 Recovery Act via instrumental variables using a new instrument, the spending done by federal agencies that were not instructed to target funds towards harder hit regions. We find a moderate positive effect on jobs created/saved (i.e., "the extensive margin") and also a significant increase in wage payments to workers whose job status was safe without Recovery Act funds (i.e., "the intensive ...