The myth of Rubinomics

Abstract

Purpose

The purpose of this paper is to analyze and understand the Rubinomics hypothesis or the argument that “fiscal discipline” will bring private investment to a growth path as a result of a decrease in real interest rates, during the 1990s in the USA.

Design/methodology/approach

The paper relies on a range of previously published works and macroeconomic data to test the Rubinomics hypothesis.

Findings

The paper concludes based on data from the experience of the US economy during the 1990s that the evidence does not validate the arguments of Rubinomics.

Originality/value

The “crowding‐out” debate is an important controversy in macroeconomics. By shedding light over this controversial issue, this paper shows that the US experience during the so‐called roaring 1990s, a period of extraordinary “fiscal discipline,” did not follow the classical crowding‐out hypothesis.

Citation

Liard‐Muriente, C.F. and Meeropol, M. (2009), "The myth of Rubinomics", Humanomics, Vol. 25 No. 3, pp. 204-216. https://doi.org/10.1108/08288660910986937