“Keynesian Government Spending Multipliers and Spillovers in the Euro Area”

Proponents of discretionary fiscal stimulus—most prominent among them Paul Krugman of Princeton University and The New York Times—emphasize the Keynesian multiplier effect that implies that additional government spending would induce an increase in private spending and therefore a greater than one-for-one effect on aggregate GDP. Yet, as shown in a recent ECB (European Central Bank) working paper