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Robert Eisner on the effects of cyclically adjusted deficits

Robert Eisner was an unreconstructed Keynesian to the very end. In his last paper (available here) he says:
"I have reported on a large number of occasions that properly measured, inflation-adjusted and cyclically adjusted public budget deficits have been associated with more rapid subsequent growth in real GNP or GDP and with reductions in unemployment."
Also according to him:
"To the extent that higher deficits were embodied in increases in government expenditures for goods and services, there appeared to be further reductions in unemployment or in the rate at which it was increasing. Each percentage point of increase in the ratio of government expenditures to potential GDP, DGEPC, was associated, in both the time-series and the cross-sections, with about 0.2 percentage points less of unemployment during the current year.DGEPC, was associated, in both the time-series and the cross-sections, with about 0.2 percentage points less of unemployment during the current year."
So fiscal expansions are expansionary. Worth remembering and re-reading Eisner in the current situation.


  1. Nice find and thanks for the link. I can't agree more, Eisner is truly worth remembering. In passing, his books entitled 'The Misunderstood Economy' and 'How real is the federal deficit' contain come excellent insight, including discussions on sectoral financial balances analysis and the inadequacies of monetary policy for boosting a depressed economy. The books were written in the 80s and 90s but are still very relevant, as you point out. I refer to Eisner's work every chance I get.


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