Title: Does neoclassical theory account for the effects of big fiscal shocks?
Description: "Some economists argue that the neoclassical growth model cannot account for the macroeconomic effects of big fiscal shocks.  This paper reassesses this view.  We test the theory using data from World War II, which is by far the largest fiscal shock in the history of the United States.  We take observed changes in fiscal policy during the war as inputs into a parameterized, dynamic general equilibrium model and compare the values of all variables in the model to the actual values of these variables in the data.  Our main finding is that the theory quantitatively accounts for macroeconomic activity during this big fiscal shock"--Federal Reserve Bank of Minneapolis web site.
Subjects: Economic aspects of World War, 1939-1945, Finance, Fiscal policy, History, Neoclassical school of economics, World War, 1939-1945
Places: United States
Time periods: 20th century