Berge, Travis, De Ridder, Maarten ORCID: 0009-0002-3550-2556 and Pfajfar, Damjan (2021) When is the fiscal multiplier high? A comparison of four business cycle phases. European Economic Review, 138. ISSN 0014-2921
Text (When is the Fiscal Multiplier High. A Comparison of Four Business Cycle Phases)
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Abstract
This paper compares the effect of fiscal spending on economic activity across various phases of the business cycle. We show that the fiscal multiplier is higher when unemployment is increasing than when it is decreasing. Conversely, fiscal multipliers do not depend on whether the unemployment rate is above or below its long-term trend. This result emerges both in the analysis of long time-series at the U.S. national level as well as for a post-Vietnam War panel of U.S. states. Our findings synthesize previous, at times conflicting, evidence on the state-dependence of fiscal multipliers and imply that fiscal intervention early on in economic downturns is most effective at stabilizing output.
Item Type: | Article |
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Official URL: | https://www.journals.elsevier.com/european-economi... |
Additional Information: | © 2021 Elsevier |
Divisions: | Economics |
Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
Date Deposited: | 30 Jul 2021 14:09 |
Last Modified: | 05 Oct 2024 00:54 |
URI: | http://eprints.lse.ac.uk/id/eprint/111517 |
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