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How large is the Keynesian multiplier in Germany?

Author

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  • Frank Westermann

Abstract

Government expenditures and tax revenue do not only have a direct impact, but they also cause a multiplier effect. The increase of earnings leads to an expansion of private consumption, and thus to a further increase in demand and a renewed increase in production, and so forth. For this reason, the effect of fiscal policy exceeds the value 1. For Germany the size of the multiplier effect can be estimated by means of data for the last 40 years of government expenditures and tax revenue. An increase of spending of one euro leads to a positive GDP effect of €1.37. A lowering of tax revenue has an impact after approximately a one year lag and has a positive effect of €1.62.

Suggested Citation

  • Frank Westermann, 2004. "How large is the Keynesian multiplier in Germany?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 57(11), pages 54-55, June.
    • Handle: RePEc:ces:ifosdt:v:57:y:2004:i:11:p:54-55
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    More about this item

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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