Gobernment issues

2011
B30/10-11

[PROGRESS REPORT]
PROJECT STAFFORDSHIRE

PROGRESS REPORT
The research question is: Is the government spending multiplier significant? The research objective consists onfinding out what the best view is, a government spending multiplier higher or lower than the unity. Then, if it is solve this question, it will be able to be sure about the real effects of a fiscal stimulusin the economy. Keywords: Multiplier, pork barrel spending, Laffer curve, confusing variables, fiscal stimulus. Structure/Index/Contents: 1) Introduction: 2) Discussion of the multiplier(Barro, Romerand Krugman) 3) The fiscal policy ( the demand-side ) 4) The fiscal policy ( the supply-side ) 5) Conclusion 1) Introduction: In this section, it will define the concept “multiplier” and it willexplain in general terms about the different positions of the authors regarding this discussion. 2) Discussion of multiplier ( Barro, Romer and Krugman ): In this section, it will describe the differentpositions of these authors in the main point of this paper: Can the government influence the economy with a fiscal policy via increment of the government spending? What is the value of the multiplier?Barro is in one side and Romer and Krugman in the other. Barro defends a low multiplier in peace-times, higher in war-times, and with the only possibility to calculate it in war-times due to theimpossibility of calculus in peace-times derived from the lack of variability in the spending in these periods of time. Romer defends a multiplier higher than Barro, 1.5 concretely, verifying the positionof Obama’s Team, and believing in the expansive paper of the government spending. Krugman says that the monetary policy does not have more influence ( interest rate equal to zero ) and then, thefiscal policy is the only way to boost the economy. 3) The fiscal policy (the demand-side): Describing the changes in the demand-side is one way to analyse the effect of the fiscal stimulus in the real...