The recent global recession has made the efficacy of fiscal-stimulus packages one of the most prominent policy debates in economics today. This column finds that the multiplier of defence spending falls in a range of 0.6 to 0.8 and argues that non-defence multipliers are unlikely to be larger. It says we should be sceptical when policymakers claim government-spending multipliers in excess of one and suggests tax cuts may be preferable to spending increases.
Read the full article from R. Barro and C. Redlick on Vox.eu here.
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