The 3.2 percent growth rate of real GDP in the first quarter (released by BEA yesterday) confirms that the recovery is looking more U-shaped than V-shaped. But it also provides further evidence that the stimulus package of 2009 has had a small contribution to the recovery. Most of the recovery has been due to investment—including inventory investment, which was positive in the first quarter after declining for all of last year—and has little to do with discretionary stimulus packages.So thus far the stimulus package seems to be having little effect on recovery. Taylor gives two charts that show the percentage contribution of investment and government purchases to real GDP growth in the first quarter and in the preceding quarters since 2007. The charts clearly indicate that the changes in real GDP growth have been mostly due to changes in investment and little to changes in government purchases. This makes New Zealand's not doing much response to the crisis look more like a good policy.
1 day ago