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Why Fiscal Stimulus is Likely to Work
Author(s) -
Fatás Antonio,
Mihov Ilian
Publication year - 2009
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/j.1468-2362.2009.01235.x
Subject(s) - economics , stimulus (psychology) , fiscal policy , macroeconomics , fiscal deficit , empirical evidence , work (physics) , keynesian economics , psychology , cognitive psychology , mechanical engineering , philosophy , epistemology , engineering
We provide an overview of the effectiveness of fiscal policy actions by summarizing evidence from empirical and theoretical studies. Empirically, expansionary policy is found to have output multipliers greater than one. Given current economic conditions, we argue that the fiscal cost of not stabilizing the economy is likely to be much higher than the cost of a deficit that helps the economy go faster towards a recovery path.