The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature

Selma Mahfouz, Richard Hemming and Michael Kell

No 2002/208, IMF Working Papers from International Monetary Fund

Abstract: This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.

Keywords: WP; monetary policy; current account; fiscal policy policy change; Ricardian equivalence; Fiscal policy; economic activity; fiscal multipliers; open economy; cost of capital; crowding out effect; money demand; low income; government spending shock; discretionary fiscal policy change; Ricardian behavior results in consumption; consumption effects; Ricardian behavior result; Government debt management; Fiscal stimulus; Global; Europe (search for similar items in EconPapers)
Pages: 52
Date: 2002-12-01
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Citations: View citations in EconPapers (261)

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