The stimulus favors economic activity
2020-04-14Klaas Staal, researcer in Public Economics and Political Economy, has had his article ”State-level Federal Stimulus Funds and Economic Growth: The American Recovery and Reinvestment Act” published in IAER.
What is the main result in your article?
- Previous research mainly focused on the beneficial effect of the economic stimulus implemented by the first Obama administration. I show that the stimulus also had a significant beneficial effect on economic activity.
Explain ”The American Recovery and Reinvestment Act”
- The Act was an economic stimulus enacted by the US administration in 2009 to reduce unemployment and mitigate the economic downturn after the Financial crisis of 2008 & 2009.
Can your results fit in the coming aftermath after the Corona situation?
- You are not the first to ask. And I will give the same answer. Not very much, as the current crisis is very different from the previous one. However, one lesson is still relevant today – and that is that the emphasis should be on programs that work quickly.
So the emphasis should not be on, for example, long-run infrastructure projects, but on, e.g., transfers to states/communities/individuals that reach the recipients quickly. These transfers can go from the central government in Stockholm to local jurisdictions like Karlstad kommun, or to firms that are otherwise healthy but now run into problems due to a sudden reduction in economic activity.