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Thursday, October 27, 2011

US Stimulus Worked?

Sullivan says the US economic stimulus worked because of a natural experiment comparing the US and the UK.  The United Kingdom did not adopt a stimulus.  Sullivan notes. “After three and a half years, U.S. GDP is just about returning to the pre-recession peak. That’s awful. But it’s far better than the U.K. where GDP is still five percent ($750 billion in US terms) below its pre-recession peak.”  Of course, two data points is just an anecdote and ceteris paribus does not apply, but this is about as good as it gets in macroeconomics.  I have yet to see an example of austerity working better than stimulus. 

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