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

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  • 1 January 2002
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      • Published in RePEc
Abstract
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.

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