The Keynesian Multiplier Effect Reconsidered
AbstractThe Keynesian multiplier effect is reinterpreted and several issues that may have misled assessments of the effect of fiscal spending are discussed. It is shown that even in the textbook Keynesian framework some transfer policy 'reduces' aggregate demand and that publ works spending may completely crowd out private consumption. Useless public works are found to be equivalent to transfers although they increase accounting national income more than transfers do. The net effect of fiscal spending on national benefits is explored and shown to equal only the direct benefit created by the spending.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0730.
Date of creation: Jan 2009
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