Tight economy boosts government spending, but hurts during normal times
The study looked at how Chile's government spending and taxes influence the economy in different economic situations. When things are tough, every dollar the government spends seems to boost the economy by more than a dollar. In normal times, that boost is weaker, giving less than a dollar back. Surprisingly, taxes don't seem to make a big difference in either situation. When the economy needs help, spending money helps more. Additionally, the study found that the interest rates set by the central bank also affect how effective government spending can be.