Fiscal Multipliers and the State of the Economy
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Summary:
Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.
Series:
Working Paper No. 12/286
Subject:
Business cycles Cross country analysis Fiscal policy Group of seven Production growth
English
Publication Date:
December 5, 2012
ISBN/ISSN:
9781475565829/1018-5941
Stock No:
WPIEA2012286
Format:
Paper
Pages:
31
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