Growth Forecast Errors and Fiscal Multipliers
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Summary:
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.
Series:
Working Paper No. 2013/001
Subject:
Expenditure Fiscal consolidation Fiscal multipliers Fiscal policy Fiscal stance
English
Publication Date:
January 3, 2013
ISBN/ISSN:
9781475576443/1018-5941
Stock No:
WPIEA2013001
Pages:
43
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