The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature
53 Pages Posted: 14 Feb 2006
Date Written: December 2002
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.
Keywords: Fiscal policy, economic activity, fiscal multipliers
JEL Classification: E62, H30
Suggested Citation: Suggested Citation