Net Economic Base Multipliers and Public Policy

The regional multiplier ordinarily applied to regional impact simulations is the Keynesian foreign trade multiplier. This assumes that all of the increase in aggregate demand is from the region’s “export” sector. In many applications, there can be offsetting changes in domestic demand with multipliers of their own. It is possible in many cases for the net multiplier to be less than 1.0. In extreme cases of differences in the import component of exports and displaced domestic demand, the net multiplier could be negative.