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The Time for Austerity: Estimating the Average Treatment Effect of Fiscal Policy
Elevated government debt levels in advanced economies have risen rapidly as sovereigns absorbed private sector losses and cyclical deficits blew up in the Global Financial Crisis and subsequent slump. A rush to fiscal austerity followed but its justifications and impacts have been heavily debated. Research on the effects of austerity on macroeconomic aggregates remains unsettled, mired by the difficulty of identifying multipliers from observational data. This paper reconciles seemingly disparate estimates of multipliers within a unified framework. We do this by first evaluating the validity of common identification assumptions used by the literature and find that they are largely violated in the data. Next, we use new propensity score methods for time-series data with local projections to quantify how contractionary austerity really is, especially in economies operating below potential. We find that the adverse effects of austerity may have been understated.
AUTHORS: Taylor, Alan M.; Jordà, Òscar
Introducing the Distributional Financial Accounts of the United States
This paper describes the construction of the Distributional Financial Accounts (DFAs), a new dataset containing quarterly estimates of the distribution of U.S. household wealth since 1989, and provides the first look at the resulting data. The DFAs build on two existing Federal Reserve Board statistical products --- quarterly aggregate measures of household wealth from the Financial Accounts of the United States and triennial wealth distribution measures from the Survey of Consumer Finances --- to incorporate distributional information into a national accounting framework. The DFAs complement other existing sources of data on the wealth distribution by using a more comprehensive measure of household wealth and by providing quarterly data on a timely basis. We encourage policymakers, researchers, and other interested parties to use the DFAs to help understand issues related to the distribution of U.S. household wealth.
AUTHORS: Batty, Michael M.; Bricker, Jesse; Briggs, Joseph S.; Holmquist, Elizabeth Ball; McIntosh, Susan Hume; Moore, Kevin B.; Nielsen, Eric; Reber, Sarah; Shatto, Molly; Sommer, Kamila; Sweeney, Tom; Henriques, Alice M.