The Spending Multiplier in the Medium Run

资源类型: 资源大小: 文档分类: 上传者:郎帅


【作者】 Holger Strulik  Timo Trimborn 

【关键词】fiscal stimulus  government spending  output multiplier  economic recovery 


【摘要】Most of the discussion about fiscal stimulus focuses on the multiplier of gov- ernment spending on impact. In this paper we shift the focus to the multiplier at the end, i. e. to the period in which a deficit spending program terminates. We show that recent time series analyses as well as economic models of different schools of thought predict that the multiplier turns negative before spending expires. This means that aggregate output at the time of expiry of fiscal stimulus is predicted to be lower than it could be without deficit spending. Here we show how that this phenomenon is indeed an outcome of main- stream business cycle theory and explain the underlying mechanism. Using phase diagram analysis we prove that the aggregate capital stock at the time of expiry of fiscal stimulus is lower than it would be without the deficit spending program. This fact explains why aggregate output is below its laissez faire level as well. We then calibrate an extended version of the model for the US and demonstrate how fiscal stimulus slows down recovery from a recession in the medium-run.