Fiscal Multipliers and the State of the Economy

Download or read book Fiscal Multipliers and the State of the Economy written by Ms.Anja Baum and published by International Monetary Fund. This book was released on 2012-12-05 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.