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American Economic Review: Vol. 102 No. 3 (May 2012)

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Fiscal Policy and the Great Recession in the Euro Area

Article Citation

Coenen, Günter, Roland Straub, and Mathias Trabandt. 2012. "Fiscal Policy and the Great Recession in the Euro Area." American Economic Review, 102(3): 71-76.

DOI: 10.1257/aer.102.3.71

Abstract

How much did fiscal policy contribute to euro area real GDP growth during the Great Recession? We estimate that discretionary fiscal measures have increased annualized quarterly real GDP growth during the crisis by up to 1.6 percentage points. We obtain our result by using an extended version of the European Central Bank's New Area-Wide Model with a rich specification of the fiscal sector. A detailed modeling of the fiscal sector and the incorporation of as many as eight fiscal time series appear pivotal for our result.

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Authors

Coenen, Günter (European Central Bank)
Straub, Roland (European Central Bank)
Trabandt, Mathias (Federal Reserve Board)

JEL Classifications

E32: Business Fluctuations; Cycles
E62: Fiscal Policy
F36: Financial Aspects of Economic Integration
G01: Financial Crises


American Economic Review



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