Yes, Stimulus Spending in a Liquidity Trap Works
Paul Krugman:
Spending and Growth: First-quarter growth results are now in for the major advanced economies; they look like this. Wait, what? Japan as star performer? What’s that about? Actually, no mystery. From Bloomberg:
Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand. So Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast.
There seems to be some kind of lesson here about macroeconomics, but I can’t quite put my finger on it …
: http://krugman.blogs.nytimes.com/2012/05/17/spending-and-growth/?pagewanted=all
