Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain

We report estimates of the fiscal multiplier for interwar Britain based on quarterly data, time-series econometrics, and ‘defense news’. We find that the government expenditure multiplier was in the range 0.3 to 0.8, much lower than previous estimates. The scope for a Keynesian solution to recession was less than is generally supposed. We find that rearmament gave a smaller boost to real GDP than previously claimed. Rearmament may, however, have had a larger impact than a temporary public works program of similar magnitude if private investment anticipated the need to add capacity to cope with future defense spending.


Issue Date:
2013
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/270531
Language:
English
Total Pages:
43
JEL Codes:
E62; N14
Series Statement:
WERP 1018




 Record created 2018-04-03, last modified 2020-10-28

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