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The Case for Fiscal Policy to Boost Growth

Vice chair of the Fed says a combination of private investment, infrastructure spending, and effective regulation are likely to promote growth.

By Bernice Napach | Updated on October 19, 2016

While the financial markets wait for higher rates orchestrated by the Fed, officials of the central bank are looking toward fiscal policy as a major catalyst for their rate hikes.

Vice Chair Stanley Fischer, speaking before the Economic Club of New York on Monday, said that according to the Fed’s FRB/US model, an increase in government spending equivalent to 1% of GDP would raise the equilibrium interest rate 50 basis points, or 0.50%, while a 1% cut in taxes would raise it by 40 basis points and a 1% increase in corporate investment would add just 30 basis points.

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