Decoupling

[KrazyHorse]

Originally posted by CrONoS
Oh I also wanted to point another post from http://worthwhile.typepad.com:

What if increased government spending is contractionary?

http://worthwhile.typepad.com/worthwhile_canadian_initi/2008/10/what-if-increased-government-spending-is-contractionary.html

I briefly read the Roberto Perotti's paper. And it seems like the grx point out, that a tax cut had more effect on the GDP, than spending increase (like the Chretien plan in early nineties).

Maybe the 2% tax cut in the GST, actually helped us out.

And I'm favorable to his conclusion:

Cutting GST is the worst possible tax cut.

[KrazyHorse]

With the possible exception of gas taxes, that is.

[CrONoS]

Originally posted by KrazyHorse


Cutting GST is the worst possible tax cut.

It's my opinion also (my preference was for lowering income tax). But the question is; Does the GST tax cut helped our economy, and if yes, by how much?

[KrazyHorse]

Once again, I will channel stephen gordon:

[KrazyHorse]

There is only one country listed for which a certain type of fiscal policy may have become more effective recently (last few decades). Can you spot it?

That's right. Canada has become very decoupled from the rest of the world economy AND tax cuts have increased in effectiveness as a stabilizer (though spending increases have diminished sharply and are in fact now strongly destabilizing)

Weird, huh?

[KrazyHorse]

Note that I don't necessarily put too much faith in the modeling being done to estimate those fiscal multipliers. But at least it's a guess.

[CrONoS]

... ok According to Perotti: Cumulative GDP response for Canada in 1980-2001 is ~1.80 for each -1% of GDP tax cut.

edit: we cross post each other ( i didn't refresh my browser, was reading the paper)

[KrazyHorse]

Yes. Possibly. If you believe his regression model.

[KrazyHorse]

As far as I can tell, as an amateur

Nobody actually understands the impact of fiscal stimulus. It's usually only engaged in at times of crisis, which are also the times when nice, equilibrium economics breaks down.

[CrONoS]

@KH

About your correlation coeff:

It would be better to divide the analysis from sector to sector (energy, manufacture, service, french porn, etc..).

If you have the data, do it, I'll be curious.

But I'm going to sleep

[KrazyHorse]

If people were actually rational actors then only the really old and sick would react in any way to a fiscal stimulus...

[KrazyHorse]

Originally posted by CrONoS
@KH

About your correlation coeff:

It would be better to divide the analysis from sector to sector (energy, manufacture, service, french porn, etc..).

If you have the data, do it, I'll be curious. But I'm going to sleep

No, I don't. If you have it then I can run Excel as well as anybody (and if you have better time series than annual I can even do a frequency domain analysis along with a Bayesian change point estimate)

[dannubis]

Originally posted by DanS
You're going to have to quote the numbers, dannubis.

You make the assertion and I have to quote numbers ?

Only in the US

[Kidlicious]

It'll be fun to watch KH explain his hairbrained theory further in the comming months.

Canada faces a financial perfect storm of a sputtering U.S. economy, tumbling oil prices and falling domestic demand that will conspire to hurt the country's growth prospects for the next few months, they said.

http://www.cbc.ca/money/story/2008/10/06/recession.html

[Victor Galis]

Originally posted by Kidicious
It'll be fun to watch KH explain his hairbrained theory further in the comming months.



http://www.cbc.ca/money/story/2008/10/06/recession.html

On the other hand, a falling dollar will soften the exporters' pain.