The missing intercept: A sufficient statistics approach to general equilibrium effects

Grant description:

How can estimates of microlevel causal effects be mapped into general equilibrium counterfactuals? Using a derivation of the central general equilibrium invariance result, this work studies general equilibrium counterfactuals for income tax rebate stimulus. The project develops a theoretically valid approximation of general equilibrium effects of spending and investment shocks in business-cycle models. It then uses estimates of responses to certain types of shocks to develop estimates of the impact of certain types of policies, which include general equilibrium effects. This research will add to our understanding of the effect of stimulus tools on the macroeconomy.