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

Hemming, Richard; Kell, Michael; Mahfouz, Selma

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

IMF Working Paper No. 02/208

53 Pages Posted: 14 Feb 2006

See all articles by Richard Hemming

Michael Kell

International Monetary Fund (IMF) - Fiscal Affairs Department

Selma Mahfouz

affiliation not provided to SSRN

Date Written: December 2002

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.

Keywords: Fiscal policy, economic activity, fiscal multipliers

JEL Classification: E62, H30

Suggested Citation: Suggested Citation

Hemming, Richard and Kell, Michael and Mahfouz, Selma, The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature (December 2002). IMF Working Paper No. 02/208, Available at SSRN: https://ssrn.com/abstract=880868