An additional explanation for the variable Keynesian multiplier: The role of the propensity to import

Sebastien Charles

Journal of Post Keynesian Economics, 2016, vol. 39, issue 2, 187-205

Abstract: This article analyzes the concept of the Keynesian multiplier from a new perspective. Several recent studies have shown that the fiscal multiplier is endogenous to the level of economic activity, increasing during recessions and decreasing during the boom. Here, we provide some evidence, explaining this variability over the business cycle, based on the overreaction of aggregate imports. Then, we apply the concept of endogenous propensity to import, varying with capacity utilization, to a neo-Kaleckian model of growth and distribution. We perform some simple simulations showing that the Keynesian multiplier increases during a recession, which logically does not advocate a reduction in public spending when the economy is in crisis.

Date: 2016
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:mes:postke:v:39:y:2016:i:2:p:187-205

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DOI: 10.1080/01603477.2016.1127121

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