In this paper, I employ a linear regression model to examine the effectiveness of four microeconomic variables, namely government debt, GDP growth rate, household consumption growth rate and government spending growth rate, in stimulating economic growth. In order to test the effectiveness of expansionary fiscal policy in different macro-environments, countries were first partitioned into low and high government debt categories. In addition, raw dataset was partitioned into two time periods, respectively, representing normal macroeconomic years and recession years. My results suggest that countercyclical government spending has been an effective stimulation tool but its effect was more significant in countries of low government debt rate or during recession years.

Recommended Citation

Luo, Y. (2013). Assess the crisis management effort following the outbreak of the subprime crisis. Lingnan Journal of Banking, Finance and Economics, 4. Retrieved from http://commons.ln.edu.hk/ljbfe/vol4/iss1/5