Template-Type: ReDIF-Paper 1.0

Author-Name: Daniel Fehrle
Author-X-Name-First: Daniel
Author-X-Name-Last: Fehrle

Author-Name: Johannes Huber
Author-X-Name-First: Johannes
Author-X-Name-Last: Huber

Title:Business cycle accounting for the German fiscal stimulus program during the Great Recession
	
Abstract: We take the neoclassical perspective and apply the business cycle accounting method
as proposed by Chari, Kehoe, and McGrattan (2007, Econometrica) for the Great Recession
and the associated stimulus program in Germany 2008-2009. We include
wedges to the variables government consumption, durables, investment, labor, net exports,
and efficiency. The results suggest: The crisis was mainly driven by the efficiency
wedge, followed by the net exports and the investment wedge. The government consumption
wedge and in particular the durables wedge acted counter-cyclical. We attribute
the latter to an internationally incomparably large cash for clunkers program
and conclude that this subsidy on durable goods was more effective than pure government
consumption.
We introduce a strategy for likelihood maximization, which reliably and quickly
locates the maximum; enables a detailed evaluation of the likelihood function and
allows large robustness checks.


Length: 44 pages
Creation-Date:  2020-06
File-URL: http://www.bgpe.de/texte/DP/197_Fehrle_Huber.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Number: 197
Classification-JEL: C32, E20, E32, H12, H31

Keywords: Fiscal stimulus, Great Recession, Business cycle accounting, Maximum-Likelihood

Handle: RePEc:bav:wpaper:197_FehrleHuber