Why Are Keynesian Multipliers Larger in Hard Times? A Palley-Aftalion-Pasinetti Explanation

Sebastien Charles, Thomas Dallery and Jonathan Marie

Review of Radical Political Economics, 2018, vol. 50, issue 4, 736-756

Abstract: We use the Annual Macroeconomic database of the European Commission (AMECO) to confirm that textbook multipliers are nearly always greater than one and that they increase during recessions. Propensity to import falls in recessions through the combined effects of the amplified fall in investment and the high import content of investment. A change in saving behavior may also raise the multiplier. These findings strongly support the need for countercyclical fiscal policies during recessions.

Keywords: fiscal multipliers; recession; globalization; import content; investment accelerator (search for similar items in EconPapers)
JEL-codes: E12 E62 F62 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:reorpe:v:50:y:2018:i:4:p:736-756

DOI: 10.1177/0486613417722527

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