Austerity and the Greek Depression

The NY Times has a nice feature that compares the Greek economy from 2007-2012 to that of the US from 1929-1934. Besides the disturbing similarity, the most notable feature of this figure is how different the government spending response has been. Although it is hard to know the exact counterfactual, austerity really does not seem to be working.


HT: Dmitri Koustas

UPDATE: Jeremie Cohen-Setton, whom you should be following via Bruegel and now twitter @JCSBruegel, pointed out that government consumption isn’t an ideal measure of fiscal support since it hides what’s going in the background with government revenues. Here’s a slide from the Romers’ presentation on the New Deal, which shows both expenditures and revenues of the US government in the 1930s. The US ran modestly sized deficits in this period (and also had the infamous premature contraction of 1937).


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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