Why Fiscal Stimulus is Likely to Work

Antonio Fatas () and Ilian Mihov ()

International Finance, 2009, vol. 12, issue 1, pages 57-73

Abstract: We provide an overview of the effectiveness of fiscal policy actions by summarizing evidence from empirical and theoretical studies. Empirically, expansionary policy is found to have output multipliers greater than one. Given current economic conditions, we argue that the fiscal cost of not stabilizing the economy is likely to be much higher than the cost of a deficit that helps the economy go faster towards a recovery path. Copyright 2009 Blackwell Publishing Ltd

Date: 2009

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