Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277237 
Authors: 
Year of Publication: 
2012
Citation: 
[Journal:] Intervention. European Journal of Economics and Economic Policies [ISSN:] 2195-3376 [Volume:] 09 [Issue:] 1 [Year:] 2012 [Pages:] 129-144
Publisher: 
Metropolis-Verlag, Marburg
Abstract: 
Fiscal spending multiplier calculations have attracted considerable attention in the aftermath of the global financial crisis. Much of the current literature is based on VAR estimation methods and DSGE models. In line with the Keynesian literature we argue that many of these models probably underestimate the fiscal spending multiplier in recessions. The income-expenditure model of the fiscal spending multiplier can be seen as a good approximation under these circumstances. In its conventional form this model suffers from an underestimation of the multiplier due to an overestimation of the import intake of domestic absorption. In this article we apply input-output calculus to solve this problem. Multipliers thus derived are comparably high, ranging between 1.4 and 1.8 for many member states of the European Union. GDP drops due to budget consolidation might therefore be substantial in times of crisis.
Subjects: 
fiscal spending multiplier
input-output calculus
income-expenditure model
European Union
EU
JEL: 
B22
C67
E12
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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