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The multiplier effect : why are results so different?

Ehrlinspiel, M. (2011) The multiplier effect : why are results so different?

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Abstract:At a very early stage of the global financial crisis of 2008 it was clear that this would go far beyond the normal cyclical movements of the global economy. In fact, the recession was on the verge of culminating in a breakdown of the global economy. Consequently, central banks had decreased their interest rates to a level near zero. Nonetheless, unemployment rose dramatically and the financial markets were far from recovery. The control over the short term nominal interest rate, which was the main operating tool, proved incapable of solving the crisis, since further decreases in interest rates were no longer an option. These conditions significantly contributed to the resurrection of a long standing question in macroeconomics: What is the size of the fiscal multiplier? In simple terms: Is increased government spending able to solve the problem?
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:88 social and public administration
Programme:Public Administration BSc (56627)
Link to this item:http://purl.utwente.nl/essays/62611
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