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Simulating the U.S. Recession with and without the Obama package: the role of excess capacity

Dixon, Peter and Rimmer, Maureen T (2010) Simulating the U.S. Recession with and without the Obama package: the role of excess capacity. Working Paper. Centre of Policy Studies (CoPS).

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Abstract

Simulations with dynamic, single-country, CGE models typically imply that reductions in domestic demand, e.g. a cut in investment, generate increases in exports and reductions in imports facilitated by real depreciation. However, currently in the U.S. a large reduction in investment is occurring simultaneously with a contraction in exports and little movement in the real exchange rate. We show that to describe this situation it is necessary to drop the standard CGE assumption that capital is always fully employed in every industry. After introducing an excess-capacity specification, we simulate the U.S. recession with and without the Obama stimulus package.

Item Type: Monograph (Working Paper)
ISBN: 9781921654008
Additional Information:

CoPS/IMPACT Working Paper Number G-193

Uncontrolled Keywords: C68; D50; E30; E60; U.S recession; CGE modelling; excess capacity; sticky rents; mark-up pricing
Subjects: FOR Classification > 1402 Applied Economics
Faculty/School/Research Centre/Department > Centre of Policy Studies (CoPS)
Depositing User: Symplectic Elements
Date Deposited: 31 Aug 2015 06:39
Last Modified: 15 Jul 2019 05:14
URI: http://vuir.vu.edu.au/id/eprint/29399
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