13
régime is.
11
When a government confronts borrowing constraints as a result of high
public debt, multipliers are smaller.
12
Multipliers are larger when private actors are credit-constrained. Under
these circumstances, consumption depends more on current income
than on expected future income and investment depends more on
current profits than on expected future profits.
13
Estimates of multipliers with credit-constrained hand-to-mouth
consumers are 50% larger than estimates under normal credit
conditions.
14
11
See J. Bradford DeLong and Lawrence H. Summers (2012), “Fiscal Policy in a
Depressed Economy”, Brookings Papers on Economic Activity 2012:1; J. Bradford
DeLong (2013), “The Full Fiscal Offset Principle”
<http://delong.typepad.com/sdj/2013/02/the-full-fiscal-offset-principle-away-from-the-
zero-lower-bound-that-is-or-why-one-would-expect-the-multiplier-to-be-zer.html>.
“Local Multiplier” studies, that examine disparate output responses to disparate fiscal
stimulus in sub-regions of a currency union—and that thus keep monetary and financial
conditions constant as the degree of fiscal impetus shifts—do show much larger
multipliers than do studies that do not control for how the central bank’s reaction function
leads monetary policy to shift as the fiscal impetus shifts. See Juan Carlos Suarez Serrato
and Philippe Wingender (2010), “Estimating Local Fiscal Multipliers” (Berkeley, CA:
U.C. Berkeley) <http://ceg.berkeley.edu/students_9_2583495006.pdf>; Gabriel
Chodorow-Reich et al. (2011), “Does State Fiscal Relief During Recessions Increase
Employment? Evidence from the American Recovery and Reinvestment Act” (Berkeley,
CA: U.C. Berkeley) <http://econgrads.berkeley.edu/gabecr/files/2011/05/Does-State-
Fiscal-Relief-During-Recessions-Increase-Employment-August-20114.pdf>; Brock
Mendel (2012), “The Local Multiplier: Theory and Evidence” (Cambridge, MA: Harvard
University); and many others.
12
See Giancarlo Corsetti, Andre Meier, and Gernot J. Müller (2012), “What Determines
Government Spending Multipliers?” (Washington DC: IMF Working Paper 12/150) <
http://www.imf.org/external/pubs/ft/wp/2012/wp12150.pdf>
13
See Giancarlo Corsetti, Andre Meier, and Gernot J. Müller (2012), “What Determines
Government Spending Multipliers?” (Washington DC: IMF Working Paper 12/150) <
http://www.imf.org/external/pubs/ft/wp/2012/wp12150.pdf>; Atif Mian and Amir Sufi
(2010), “Household Leverage and the Recession of 2007-09”, IMF Economic Review
58:1, pp. 74–117; Gauti Eggertsson and Paul Krugman (2012), “Debt, Deleveraging, and
the Liquidity Trap: A Fisher-Minsky-Koo Approach”, The Quarterly Journal of
Economics, 1469–1513. <http://qje.oxfordjournals.org/content/127/3/1469.full.pdf>.
14
See Atif Mian and Amir Sufi (2010), “Household Leverage and the Recession of 2007-
09”, IMF Economic Review 58:1, pp. 74–117.