It is common knowledge among economists though not always with investors that fiscal stimulus is more effective when the economy is in recession than when it is growing. The fiscal multiplier that measures the change in GDP for every dollar spent by the government tends to be below 1 in boom times and above 1 in recessions. In other words, additional government spending in boom times tends to be a wasteful exercise where some of the government spending does not enhance economic growth. But in a recession, government spending significantly boosts economic growth and accelerates the recovery from the depths of the recession. That is why I am very much in favour of the government stimulus programmes enacted during the pandemic. Governments were doing the right thing at the right time.
Fiscal stimulus in times of low interest rates
Fiscal stimulus in times of low interest…
Fiscal stimulus in times of low interest rates
It is common knowledge among economists though not always with investors that fiscal stimulus is more effective when the economy is in recession than when it is growing. The fiscal multiplier that measures the change in GDP for every dollar spent by the government tends to be below 1 in boom times and above 1 in recessions. In other words, additional government spending in boom times tends to be a wasteful exercise where some of the government spending does not enhance economic growth. But in a recession, government spending significantly boosts economic growth and accelerates the recovery from the depths of the recession. That is why I am very much in favour of the government stimulus programmes enacted during the pandemic. Governments were doing the right thing at the right time.