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Scrutinizing Aggregate Frisch Elasticity Estimates With the U.S. Budget Sequestration "Experiment"
Hu, Ruiyang1; Zarazaga, Carlos2
Size of Audience100
Type of SpeakerAttendee (Paper presented by Coauthor)

The aggregate Frisch elasticity is critical for the evaluation of the outcomes of
alternative fiscal and monetary policies, as well as of competing interpretations of important macroeconomic phenomena, but consensus about its magnitude remains elusive. The temporary government spending cuts initiated by a 2013 U.S. budget sequestration procedure had experiment-like features almost ideal for measuring that elasticity from the responses that that policy development induced on macroeconomic variables. The paper scrutinizes those responses with a novel methodology that borrows its main elements from the “event study”and Business Cycle Accounting traditions. Its main finding is that studies that calibrate the aggregate Frisch elasticity to the budget sequestration evidence should favor values for that elasticity in the low end of the range of those that have been proposed as empirically plausible in the literature.

KeywordAggregate Labor Supply Frisch Elasticity, Government Spending Cuts, Event Study Approach, Business Cycle Accounting
Conference Place2021 IEF-CEA China’s Economic and Financial Development Conference
Funding ProjectTopics in Business Cycles and Asset Pricing
Document TypePresentation
Affiliation1.University of Macau
2.Southern Methodist University
First Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Hu, Ruiyang,Zarazaga, Carlos. Scrutinizing Aggregate Frisch Elasticity Estimates With the U.S. Budget Sequestration "Experiment"
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