Template-Type: ReDIF-Paper 1.0
Author-Name: Enrico Gabriele 
Author-X-Name-First: Enrico
Author-X-Name-Last: Gabriele
Author-Email: 
Author-Workplace-Name: LUMSA University 
Title: Re-Evaluating The Keynesian Multiplier: Critiques And Evidence From Europe

Abstract: This paper starts from Keynes’ General Theory to demonstrate the existence of a non-linear Keynesian multiplier on the grounds of cross-country data. Thus, we prove the effectiveness of short-run countercyclical exogenous stimuli during downturns. The role of fiscal spending is discussed in light of different schools of thought, including the well-known “expansionary fiscal contraction” theory. Moreover, we examine the European fiscal rules of convergence – aimed to sovereign debt sustainability – that affect the size of “fiscal space”. Empirical data from several Eurozone countries provide evidence of traditional multipliers. Furthermore, the Greek economy displays a non-linear case of multiplier. This leads to rejecting the assumption of a weak Keynesian setting, which supported instead the IMF-backed fiscal contraction.
Length: 18 pages
Creation-Date: 2017-08
Publication-Status: 
File-URL: https://repec.lumsa.it/wp/wpC21.pdf
File-Format: Application/pdf
Number: wpC21
Classification-JEL: E12, E17, E61, E63, E65
Keywords: Keynesian Multiplier; Expansionary Fiscal Contraction; Euro Sovereign Crisis
Handle: RePEc:lsa:wpaper:wpC21