Keynesian Multiplier, Banking Credit and Output

Abstract

The article examines the concept of the Keynesian multiplier with the goal of proposing the conditions under which it operates. The idea put forth is that within a period of production, the multiplier is necessarily equal to unity. However, its value can increase during the course of various periods of production, depending precisely on the role of the banking system in the renewal and expansion of credit. Although this argument is not original, it has been largely ignored in the Post-Keynesian discourse. The objective of this article is to recover these arguments within the history of Post-Keynesianism, as this school of thought carries with it important implications for policy making and contributes to the strengthening of an appropriate theoretical context for fiscal policy decisions. This debate is fundamental to the decisions taken during the current crisis and the policies within reach of governments to reactivate economic growth.