Government Failure Redux: Why Did Federal Spending Lose Stimulative Traction?

Using structural VAR Model, we show that federal spending in the U.S. after 2008 financial crisis mainly contributed to an increase in the profits of U.S. financial industry through financial derivative assets. It made a limited contribution to the stimulation of the real sector of the economy. Structural Vector Autoregressive (SVAR) Model Federal spending in the U.S. after 2008 financial crisis mainly contributed to an increase in the profits of U.S. financial industry through financial derivative assets. It made a limited contribution to the stimulation of the real sector of the economy. Abstract is attached. Full paper will be sent out in a week or two.