Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64189
Authors: 
Basu, Deepankar
Year of Publication: 
2009
Series/Report no.: 
Working Paper, University of Massachusetts, Department of Economics 2009-14
Abstract: 
This paper derives conditions for two key Keynesian propositions in a simple IS-LM model: (a) the paradox of thrift, and (b) the crowding-in of private investment expenditures by government expenditures. A linear specifcation of the model is then presented as a special case that can be used for empirical analysis. Using data for the US economy for the period 1959 - 2009, time series estimation of the linear model using instrumental variables regression shows that the paradox of thrift and crowding-in are real possibilities, especially in the sub-period, 1974 - 2009, that excludes the Golden Age of capitalism.
JEL: 
E12
E20
Document Type: 
Working Paper

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