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.


Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.