Fiscal Multipliers in Recessions


Speaker:Harris Dellas, University of Bern
Date: Wednesday 13 June 2012
Time: 15.30
Location: STC/D

Further details

The Great Recession, and the fiscal response to it, has revived interest in the size of fiscal multipliers. Standard business cycle models have difficulties generating multipliers greater than one. And they also fail to produce any significant asymmetry in the size of the multipliers over the business cycle. In this paper we employ a variant of the Curdia-Woodford model of costly financial intermediation to show that fiscal multipliers are strongly countercyclical. In particular, they can be greater than two during recessions and smaller than one during expansions.