Are the Effects of Fiscal Policy Asymmetric?

Régis Barnichon, Christian Matthes and David A. Price

Richmond Fed Economic Brief, 2017, issue September

Abstract: Economic research on the size of the fiscal multiplier has assumed that the effects of changes in government spending are symmetric ? that is, they influence economic output to the same degree whether the change is an increase or a decrease. Richmond Fed research indicates that this is not the case; the fiscal multiplier does vary according to the direction of the fiscal action and also varies with the stage of the economic cycle. This finding sheds light on likely outcomes of fiscal policies and helps account for inconsistent estimates of the multiplier in the literature.

Keywords: fiscal policy; economic cycles; fiscal multipliers (search for similar items in EconPapers)
Date: 2017
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