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Are the Effects of Fiscal Policy Asymmetric?

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Abstract

Economic research on the size of the fiscal multiplier has assumed that the effects of changes in government spending are symmetric ? that is, they influence economic output to the same degree whether the change is an increase or a decrease. Richmond Fed research indicates that this is not the case; the fiscal multiplier does vary according to the direction of the fiscal action and also varies with the stage of the economic cycle. This finding sheds light on likely outcomes of fiscal policies and helps account for inconsistent estimates of the multiplier in the literature.

Suggested Citation

  • Régis Barnichon & Christian Matthes & David A. Price, 2017. "Are the Effects of Fiscal Policy Asymmetric?," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue September.
    • Handle: RePEc:fip:fedreb:00056
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