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Can a large-scale defcit spending program speed up recovery after recession? To answer that question we calibrate a standard neoclassical growth model with US data and assume that an exogenous shock has driven aggregate output far below steady-state level. We calibrate the model such that a...
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The author of this brief offers evidence that policies aimed at stimulating private sector investment through interest … saving or lowering the budget deficit, a higher level of business investment is not one of them. Rather, because of the … sizable effects of the business cycle and financial channels on investment, such a program will weaken the economy in the …
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the current predicament. -- financial crisis ; investment ; monetary and fiscal policies …
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