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Vol. 92, No. 2
Posted 2010-03-01

Fiscal Multipliers in War and in Peace


Proponents of fiscal stimulus argue that government spending is needed to replace the private spending normally lost during a recession. Estimates of the so-called fiscal multiplier based on wartime episodes are used to support the proposition that a peacetime intervention can “stimulate” the economy in a desirable manner. The author argues that a wartime crisis is fundamentally different from a peacetime economic crisis.




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