YES, THE MULTIPLIER IS LIKELY TO BE VERY SMALL AWAY FROM THE ZERO NOMINAL LOWER BOUND ON INTEREST RATES. WHY DO YOU ASK?
In trotting around the country giving versions of DeLong and Summers, “Fiscal Policy in a Depressed Economy”, I have found that a point that seemed completely obvious to us is not obvious at all to many.
Here is the point: an optimizing central bank that cares about inflation and unemployment but not about the level of interest rates will, as long as it does not find itself at the zero nominal lower bound, engage in full fiscal offset: will take care to make sure that the net-of-monetary-policy-reaction fiscal multiplier is very close to zero by making the monetary policy reaction function in (r, Y) space nearly vertical.
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