Fiscal policy in the aftermath of 9/11

Martin S Eichenbaum, Jonas D M Fisher

Research output: Contribution to journalReview article

20 Scopus citations

Abstract

This paper investigates the nature of U.S. fiscal policy in the aftermath of 9/11. We argue that the recent declines in the government surplus and tax rates cannot be accounted for by either the state of the U.S. economy as of 9/11 or as the typical response of fiscal policy to a large exogenous rise in military expenditures. Our evidence suggests that, had tax rates responded in the way they 'normally' do to a large fiscal shock, aggregate output would have been lower and the surplus would not have changed by much. Our results do not bear directly on the desirability of the decline in tax rates or the surplus after 9/11.

Original languageEnglish (US)
Pages (from-to)1-22
Number of pages22
JournalJournal of Money, Credit and Banking
Volume37
Issue number1
DOIs
StatePublished - Feb 1 2005

Keywords

  • 9/11
  • Fiscal policy
  • Neoclassical growth model

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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