Another one from Jordà, Schularick and Taylor

The latest in an important series of papers by Jordà, Schularick and Taylor is described here.

Although they don’t spin it this way (which is not surprising, since they don’t provide evidence about the impact of fiscal policy on housing booms and busts), the work suggests to this reader potential arguments (on top of the more standard ones) regarding the benefits of automatic stabilisers and countercyclical fiscal policy.

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6 thoughts on “Another one from Jordà, Schularick and Taylor”

  1. I wonder how useful past data is to the current situation with interest rates on the floor and monetary policy apparently knackered.
    This is like the end of a Kondratieff wave or maybe the end of several. There is no part of the world that hasn’t been brought into the system.

  2. Counter-cyclical fiscal policy does not appear to be popular with the electorate so rational politicians tend not to embrace it. What to do if the electorate is reckless and bond investors are driven by momentum and herding?

  3. @ Dan
    Synchronize the business cycle with the electoral cycle by requiring the government to hold an election within one year whenever GDP falls for two consecutive quarters…

  4. @ skeptic

    GDP doesn’t seem to be going anywhere in Europe and it’s barely moving in the US. Excessive debt seems to be a problem. Plus the share of corporate profits as a % of GDP.

    So your suggestion might lead to elections once every 18 months

  5. @ skeptic

    Voters might lose their awe of finance.
    And if that happens serious financial reform would be a dead cert.

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