GDPe = -473.109 + 2.39936*FE + 569.291*MW + 5.67532*ER – 0.242064*D + + 0.245723*DEBTS
The coefficient for the fiscal policy (≈2.4) in the GDPe equation is the Keynesian multiplier for this sample. It means that ceteris paribus MW, ER, D and DEBTS, a fiscal expenses expansion of US$ 1 billion does not touch the aggregate supply curve and leads to an aggregate demand shift such that at the new theoretical equilibrium point the US GDP would initially be US$ 2.4 billion larger. Vice versa, a reduction of 1 US$ billion in the fiscal expenses would cause a GDP initial loss of US$ 2.4 billion. Primary surpluses cause recession and unemployment. The coefficient of each explanatory variable depends not only upon its time performance vis-à-vis the time performance of the endogenous variable; it depends also on the time performance of all other explanatory variables thus making ...
... middle of paper ...
...ger a continuous process of a GDP sound expansion the interest rate should be reduced indefinitely even after crossing the zero line, but then it would no longer be a monetary policy but a fiscal policy.
BAIMAN, Ron and Mel Rothenberg (2007). Rentier-Based Finance-Led Macroeconomies: Keynesian or Classical in the Short-run, but Unsustainably Debt Dependent and Minskyan in the Long-run. Chicago Political Economy Group Working Paper 2007-1. http://www.cpegonline.org/workingpapers/CPEGWP2007-1.pdf.
BALKE, Nathan S. and Kenneth M. Emery (1994). Understanding the Price Puzzle. Economic Review of The Federal Reserve Bank of Dallas, Fourth Quarter. http://www.dallasfed.org/assets/documents/research/er/1994/er9404b.pdf.
COURNOT, Antoine August (1838). Recherche sur les Principes Mathématiques de la Théorie des Richesses”. Paris: Marcel Rivière, 1938 edition.
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