In the Long Run, the Multiplier is Dead: Lessons from a Simulation

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Title In the Long Run, the Multiplier is Dead: Lessons from a Simulation
Author Guest, Ross; Makin, Anthony John
Journal Name Agenda
Editor William Coleman
Year Published 2011
Place of publication Canberra
Publisher ANU epress
Abstract This paper re-examines the significance of the fiscal multiplier from an inter-temporal perspective using simulation results derived from a standard overlapping-generations framework. It reveals that even if fiscal stimulus in the form of extra public consumption spending is assumed to increased output and employment in the short run, the negative medium to long-term consequences of the stimulus will ultimately exceed, in present-value terms, the short-term macroeconomic benefits of that stimulus. This is due to the interest rate and tax effects of the stimulus-induced budget deficit which lowers future private investment, household consumption, and labour supply.
Peer Reviewed Yes
Published Yes
Publisher URI
Copyright Statement Copyright remains with the authors 2011. The attached file is reproduced here in accordance with the copyright policy of the publisher. For information about this journal please refer to the journal's website or contact the authors.
Volume 18
Issue Number 1
Page from 13
Page to 21
ISSN 1322-1833
Date Accessioned 2011-06-11
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject Macroeconomics (incl Monetary and Fiscal Theory)
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

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