Four readings on the expansionary austerity zombie:
Reading #1: Paul Krugman (2015):
Views Differ on Shape of Macroeconomics (2015): "The doctrine of expansionary austerity...:
...the claim that slashing spending would actually boost demand and employment, because it would have such positive effects on confidence that this would outweigh the direct drag--was immensely popular among policymakers in 2010, as the great turn toward austerity began. But the statistical underpinnings of the doctrine fell apart under scrutiny: the methods Alberto Alesina used to identify changes in fiscal policy did not, it turned out, do a very good job, and more careful work found that historically austerity has in fact been contractionary after all. Moreover, the experience of austerity programs seemed to confirm what Keynesians new and old had warned from the beginning--that the negative effects of austerity are much larger under conditions where they cannot be offset by conventional monetary policy. So at this point research economists overwhelmingly believe that austerity is contractionary (and that stimulus is expansionary)....