Publication

The policy brief discusses the policy implications of changes in the potential growth rate in view of the debate on the size of the government spending multiplier. In response to the global recession caused by the financial crisis of 2007–2008, many governments resorted to fiscal policy once monetary policy was constrained by the zero lower bound of the short-term interest rate. The intervention has prompted academic and policy debates on the effectiveness of fiscal policy, in particular government spending, in bringing strong recovery from the recession.