Thursday, October 25, 2012

Stimulus v. Austerity, Redux: US and UK on Divergent Paths

Over at Vox Eu, Alan Taylor and Moritz Schularick compare the performance of the US and the UK in a financial recession. They find the US doing a bit better than what one would predict and the UK doing considerably worse.

The takeaway is, of course, that this is suggestive of fiscal stimulus being a better response than austerity in such times.  But, as with everything, we will never have the counterfactual and so more general conclusions are probably best to avoid.  Still, the bulk of the evidence right now seems to be in Keynes' corner.

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