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Fiscal Multipliers and the State of the Economy

Author

Listed:
  • Ms. Anja Baum
  • Mr. Marcos Poplawski Ribeiro
  • Miss Anke Weber

Abstract

Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.

Suggested Citation

  • Ms. Anja Baum & Mr. Marcos Poplawski Ribeiro & Miss Anke Weber, 2012. "Fiscal Multipliers and the State of the Economy," IMF Working Papers 2012/286, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/286
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    References listed on IDEAS

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