Munich Personal RePEc Archive

On the Algebraic Calculation of the Fiscal Multiplier

Nizam, Ahmed Mehedi (2019): On the Algebraic Calculation of the Fiscal Multiplier.

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Algebraic calculation of the fiscal multiplier ignores the concept of velocity of money. Here, we incorporate the concept of velocity of money in the algebraic derivation of the fiscal multiplier which results into a slightly different representation. Then, we empirically calculate the values of fiscal multipliers for 05 (five) OECD countries using our proposed algebraic representation and compare the results with the classical Keynesian values. Our results also point out why the theoretical values of the fiscal multipliers are higher than the empirical values.

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