Seminar

Debt Hangover in the Aftermath of the Great Recession

Aurélien Eyquem (Université Lyon II)

December 6, 2016, 17:00–18:30

Room MS 001

Macroeconomics Seminar

Abstract

Following the Great Recession, U.S. government debt levels ended up well over 100% of output. We develop a dynamic general equilibrium model to evaluate the role of various shocks during and after the Great Recession; shocks directly affecting the labor market are found to have the greatest impact on macroeconomic activity more broadly. We then evaluate the macroeconomic consequences of using a variety of fiscal policy instruments to implement a fiscal austerity program to return the debt-output ratio to its pre-Great Recession level. Our welfare analysis reveals that the capital income tax is the most preferred option while the labor income tax is the least preferred.

Reference

Aurélien Eyquem (Université Lyon II), Debt Hangover in the Aftermath of the Great Recession, Macroeconomics Seminar, TSE, December 6, 2016, 17:00–18:30, room MS 001.