This is a draft of a forthcoming JEL paper. I've only skimmed it, but it is entirely consistent with everything he's written about the stimulus in the past. The PCE regressions on page 9 truly astound me.
How are these regressions identified?
I have no idea. ARRA spending is not exogenous, Prof. Taylor. That variable deserves to be on the left hand side of the equation as much as PCE. That's the whole f%#&ing empirical exercise. If we could just do what you've done here we could wrap up this whole economics thing in a matter of weeks and get on to figuring out how many angels can dance on the head of a pin.
On another note entirely - I worked with Ned Gramlich, who he cites in the introduction, before he passed away a couple of years ago.
UPDATE: Another question. Even if Taylor did convincingly identify any of his models, why is he so focused on PCE? You would want to see an impact on everything, but I would have looked at investment first. Isn't that what Keynesian policy is trying to affect directly, with the impact on consumption only indirect?
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