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Fiscal Multipliers and the State of the Economy Marcos Poplawski-Ribeiro

Fiscal Multipliers and the State of the Economy

Marcos Poplawski-Ribeiro

Published December 5th 2012
ISBN : 9781475523928
ebook
31 pages
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 About the Book 

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 showMoreOnly 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.