Clark Center Forum

“Fiscal stimulus” is the proposition that by borrowing money and spending it, the government can raise the overall state of the economy, raising output and lowering unemployment. Can it work? Do the arguments for it make any sense? If so, does the economy suffer from the ailments that fiscal stimulus can cure? One form of […] 

Alberto Alesina and Luigi Zingales Wall Street Journal In virtually all economics classes, including those taught by the many excellent economists on the Obama team, the idea of government spending as an engine for growth is not a popular topic. Yet despite their skepticism of Keynesianism in the classroom, when it comes to public policy, […] 

This Wednesday Mr Geithner will be confirmed as the new Secretary of Treasury. Never before in U.S. history has this position been so important. Mr Geithner’s decisions in the next few weeks will have a dramatic impact on the length and the depth of this recession and will shape the financial sector for decades to come. Mr Geithner […] 

There is an identity in macroeconomics. It says that in any given year private investment must equal the sum of private savings, corporate savings (retained earnings), and government savings (the government surplus, which is more likely negative, that is, a deficit), PI = PS + CS + GS (1) In a global economy the quantities […] 

Takeo Hoshi and Anil K Kashyap NBER Working Paper Series  ** updated version ** The U.S. government is using a variety of tools to try to rehabilitate the U.S. banking industry. The two principal policy levers discussed so far are employing asset managers to buy toxic real estate securities and making bank equity purchases. Japan […] 

Oliver Hart and Luigi Zingales December 3, 2008 This year will be remembered not just for one of the worst financial crises in American history, but also as the moment when economists abandoned their principles. There used to be a consensus that selective intervention in the economy was bad. In the last 12 months this […] 

Joshua Rauh and Luigi Zingales November 19, 2008 Not long ago, Alitalia was one of the largest airlines in the world. Today it is a shadow of its former self, having burned massive amounts of money. The culprit was the Italian government, which continued providing subsidized financing to the money-losing airline, delaying the necessary restructuring. […] 

November 6, 2008 The central problem in fostering global economic dialogue is that it is currently a dialogue between the deaf. Industrial countries stopped requiring financing long ago, believe they are responsible global citizens, and guard their policy independence carefully. It seems they view the primary role of multilateral institutions as correcting the policy mistakes […] 

November 06, 2008 In today’s Slate, Ray Fisman of Columbia Business School writes “What’s In It for Me?: How congressmen decided to vote for the bailout.” Read article> For a detailed analysis of the bailout, see a new working paper by Atif Mian, Amir Sufi, and Francesco Trebbi of the Chicago GSB. Read more> 

Pietro Veronesi and Luigi Zingales November 3, 2008 We calculate the efficiency and distributional effects of the largest ever U.S. Government intervention in the financial system. Possible systemic effects aside, we estimate that the revised Paulson plan increased the value of banks’ financial claims by $133 billion at a taxpayers’ cost of $112 -135 billions, […]