Recessions Boost Keynesian Multipliers, Urging Countercyclical Fiscal Policies
Keynesian multipliers are bigger during tough economic times, according to a study using European Commission data. The study shows that these multipliers are usually above one and rise during recessions. This happens because people spend less on imports during recessions, due to lower investment and the high import content of investments. Changes in saving habits can also boost the multiplier effect. These results suggest that it's important to use government spending to help the economy during recessions.