Old-time Macro Religion
By Arnold Kling
Greg Mankiw talks about analysis by Ray Fair which says that Bush Administration economic policy kept the recession that he inherited from being much worse.
Fair assesses the impact of monetary and fiscal policy during the recovery from the recent recession. An excerpt:
Had there been no tax cuts, employment would have been 2.2 percent lower by 2004:3 than it actually was; had there been no large increases in federal purchases of goods, employment would have been 1.2 percent lower; and had there been no fall in short-term interest rates, employment would have been 2.5 percent lower. These effects are roughly additive in the model (fourth experiment), and the combined estimate is that employment would have been 5.6 percent lower in 2004:3 than it actually was.
Without the quantitative estimates, I offered this traditional Keynesian perspective in the macro chapters of Learning Economics. However, I retain my basic skepticism about macro-econometric models. Ray Fair is sort of the last true believer in them.