Are fiscal multipliers regime-dependent? : a meta regression analysis

We analyze whether estimated multiplier effects are systematically higher if the economy suffers a downturn. For that purpose, we conduct a meta-regression analysis on a unique data set of 98 empirical studies with more than 1800 observations on multiplier effects and control for regime dependence of the multiplier. We find spending multipliers to significantly increase by about 0.6 to 0.8 units during a downturn. Moreover, spending multipliers significantly exceed tax multipliers by about 0.3 units in normal times and even more so in recession regimes. Based on a broad array of empirical evidence, we thus conclude that in order to limit the adverse consequences for growth, fiscal consolidation should take place during the recovery and should be primarily tax-based.