Abstract
A small, but growing, body of literature searches for evidence of non-Keynesian effects of fiscal contractions. That is, some evidence exists that large fiscal contractions stimulate short-run economic activity. Our paper continues this research effort by systematically examining the effects, if any, of unusual fiscal events - either non-Keynesian results within a Keynesian model or Keynesian results within a neoclassical model -- on short-run economic activity. We examine this issue within three separate models -- a St. Louis equation, a Hall-type consumption equation, and a growth accounting equation. Our empirical findings are mixed, and do not provide strong systematic support for the view that unusually large fiscal contractions/expansions reverse the effects of normal fiscal events. Moreover, we find only limited evidence that trigger points are empirically important.
Recommended Citation
Miller, Stephen M. and Russek, Frank S., "The Relationship between Large Fiscal Adjustments and Short-Term Output Growth Under Alternative Fiscal Policy Regimes" (1999). Economics Working Papers. 199904.
https://digitalcommons.lib.uconn.edu/econ_wpapers/199904