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Episode: Rethinking keynesian fiscal stimulus
Description: Contributor(s): Professor Valerie Ramey | Join us for the 2025 Economica-Phillips Lecture which will be delivered by Valerie Ramey.
Starting in the 1930s, Keynesian fiscal stimulus was the leading policy tool for fighting recessions, but it subsequently fell out of favor with the discovery of the permanent income hypothesis and evidence for the effectiveness of monetary policy. However, Keynesian fiscal stimulus re-emerged as an important policy tool when interest rates hit the effective lower bound during the Global Financial Crisis. Most policymakers and many academics now believe that temporary transfers, infrastructure spending, and other types of government purchases and tax programs...