A note on the policy implications of the fiscal multiplier
AbstractWe present an elementary analysis of the dynamical aspects of the GDP / government surplus multiplier with relevance to the assessment of a country's debt repayment policy. We show the (at first) counter intuitive result that in order to reduce the Debt/GDP ratio, countries with high Debt to GDP should go into further debt, as long as the Debt to GDP ratio is roughly greater than the inverse of the multiplier. Thus small values of the multiplier make further debt undesirable, and conversely.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1310.3083.
Date of creation: Oct 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
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