NEW PAPER THREAD: Our paper on fiscal multipliers has just been released by @PIIE. We create a dataset of large fiscal expansions for 17 #OECD countries between 1960 and 2007 piie.com/publications/w… 1/8
2/10 The database is constructed by first finding when a country's cyclically adjusted deficit increased by a lot and then by reading OECD and IMF reports published in those years to check whether a fiscal stimulus did in fact happen at that time and why
3/10 Our first result is that it's crucial to complement the statistical approach to identifying large shift in fiscal policy with narrative evidence. Relying only on large shifts in the cyclically adj deficit to identify episodes of large fiscal expansions is a REALLY bad idea
2/ Until this 10/18 letter ec.europa.eu/info/sites/inf… from @EU_Commission, it was generally understood that an EDP in the corrective arm of the Stability and Growth Pact (or a Significant Deviation Procedure in its preventive arm) could only be opened in 2019
3/ The basic reason for that understanding was that both levers of the SGP could be activated against Italy but based on fiscal outcomes rather than on fiscal plans as explained by @gregclaeys and Antoine Mathieu-Collin in this @bruegel_org post bruegel.org/2018/10/italys…
This morning @BLS_gov published #CPI for June. Of particular interest is the data on washing machines as @realDonaldTrump introduced a 20% tariff on them in Jan. Since then, I find that their price is 16% higher than would otherwise have been expected without the tariff. @PIIE
The biggest month to month price increases were in April (+9.6%), May (+7.4%), and January (+3.4%). The price increase for June is +1.8%.
The empirical model predicts the change in the price of washing machine based on its own lags and on current and lag values of inflation. Using current and lag values of retail sales as predictors do not change the order of magnitude.