The Unassuming Economist

From a paper by Karen Dynan and Douglas Elmendorf:

“This paper simulates economic developments as if the discretionary fiscal stimulus enacted in the
past two recessions had not occurred and additional automatic fiscal stabilizers had been deployed
instead. For the calibration of key economic relationships most consistent with the empirical
literature, we find that more sustained fiscal stimulus would have pushed unemployment down
more rapidly following the Great Recession and that more limited stimulus would have caused
inflation to increase much less following the COVID recession. We caution, though, that our
estimates are uncertain given the large number of assumptions embedded in the calculations. Under
different assumptions about the supply side of the economy when resource utilization is high, the
stimulus enacted in early 2021 was not a significant cause of the observed runup in inflation that
followed, and substituting an automatic stabilizer would have made little difference to inflation.”