The Empirical Case against Government Stimulus - Robert P. Murphy - Mises Daily

The Empirical Case against Government Stimulus - Robert P. Murphy - Mises Daily: "What's really amazing about the [European Central Bank] piece is that it stressed that spending cuts were a much better way of closing a budget hole than raising taxes."

"Our analysis is based on new data on forty-four countries spanning about two hundred years. The dataset incorporates over 3,700 annual observations covering a wide range of political systems, institutions, exchange rate arrangements, and historic circumstances. Our main findings are: First, the relationship between government debt and real GDP growth is weak for debt/GDP ratios below a threshold of 90 percent of GDP. Above 90 percent, median growth rates fall by one percent, and average growth falls considerably more. We find that the threshold for public debt is similar in advanced and emerging economies."

"The anti-Keynesians point to actual success stories as evidence of the potency of their policies. The Keynesians, in contrast, point to awful economies and claim that they'd be even worse were it not for the Keynesian 'medicine.'"