Natural Experiments in Macroeconomics

108 Pages Posted: 8 Jun 2015 Last revised: 4 Jul 2021

See all articles by Nicola Fuchs-Schündeln

Nicola Fuchs-Schündeln

Goethe University Frankfurt

Tarek A. Hassan

Boston University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2015

Abstract

A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.

Suggested Citation

Fuchs-Schündeln, Nicola and Hassan, Tarek Alexander, Natural Experiments in Macroeconomics (June 2015). Available at SSRN: https://ssrn.com/abstract=2615634

Nicola Fuchs-Schündeln (Contact Author)

Goethe University Frankfurt ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Tarek Alexander Hassan

Boston University ( email )

270 Bay State Road
Boston, MA 02215
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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