Fiscal multiplier tends to double in times of crisis, Bank of Portugal paper shows
The fiscal multiplier for government consumption is likely to double in a time of crisis, a new Bank of Portugal research paper has found.
Fiscal tightening, moreover, has "substantially larger" lagging effects, and revenue-based consolidation is more recessive when the economy is weak.
The paper, Fiscal Multipliers in a Small Euro Area Economy: How Big Can They Get In Crisis Times?, analyses the size of short-run fiscal multipliers associated with budget consolidation in both normal and crisis
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