Growth Forecast Errors and Fiscal Multipliers
This paper investigates the relation between growth forecast errors and planned fiscal
consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal
consolidation has been associated with lower growth than expected, with the relation being
particularly strong, both statistically and economically, early in the crisis. A natural
interpretation is that fiscal multipliers were substantially higher than implicitly assumed by
forecasters. The weaker relation in more recent years may reflect in part learning by
forecasters and in part smaller multipliers than in the early years of the crisis.
http://www.imf.org/external/pubs/ft/wp/2013/wp1301.pdf
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