The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature

By Selma Mahfouz, Richard Hemming, Michael Kell

December 1, 2002

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Selma Mahfouz, Richard Hemming, and Michael Kell. The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature, (USA: International Monetary Fund, 2002) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.

Subject: Expenditure, Fiscal multipliers, Fiscal policy, Fiscal stimulus, Government debt management, Public financial management (PFM)

Keywords: Consumption effects, Cost of capital, Crowding out effect, Current account, Discretionary fiscal policy change, Economic activity, Europe, Fiscal multipliers, Fiscal policy, Fiscal policy policy change, Fiscal stimulus, Global, Government debt management, Government spending shock, Low income, Monetary policy, Money demand, Open economy, Ricardian behavior result, Ricardian behavior results in consumption, Ricardian equivalence, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/208
Stock No:

WPIEA2082002
ISBN:

9781451874716
ISSN:

1018-5941

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