David Romer - Research

Research

Romer's early research made him one of the leaders of the New Keynesian economics.

In more recent work, Romer has worked with Christina Romer on fiscal and monetary policy from the 1950s to the present, using notes from the meetings of the Federal Open Market Committee (FOMC) and the materials prepared by Fed staff to study how the Federal Reserve makes its decisions. His work suggests that some of the credit for the relatively stable economic growth in the 1950s should lie with good policy made by the Federal Reserve, and that the members of the FOMC could at times have made better decisions by relying more closely on forecasts made by the Fed professional staff.

Most recently, the Romers have focused on the impact of tax policy on government and general economic growth. This work looks at the historical record of US tax changes from 1945–2007, excluding "endogenous" tax changes made to fight recessions or offset the cost of new government spending. It finds that such "exogenous" tax increases, made for example to reduce inherited budget deficits, reduce economic growth (though by smaller amounts after 1980 than before). Romer and Romer also find "no support for the hypothesis that tax cuts restrain government spending; indeed ... tax cuts may increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases."

He has also written papers on some unusual subjects for a macroeconomist, such as “Do Students Go to Class? Should They?”, and “Do Firms Maximize? Evidence from Professional Football.”