IMF Working Papers

Growth Forecast Errors and Fiscal Multipliers

By Olivier J Blanchard, Daniel Leigh

January 3, 2013

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Olivier J Blanchard, and Daniel Leigh. Growth Forecast Errors and Fiscal Multipliers, (USA: International Monetary Fund, 2013) accessed December 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Expenditure, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Fiscal stance

Keywords: A number of economy, Estimation code, Estimation result, Estimation strategy, Europe, Fiscal consolidation, Fiscal multiplier, Fiscal multipliers, Fiscal policy, Fiscal stance, Forecast error, Forecasting, Government expenditure, IMF staff note, Least squares, Liquidity trap, Output fluctuations, Potential GDP, Reports IMF staff assumption, Taxation, WEO database, WP

Publication Details

  • Pages:

    43

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2013/001

  • Stock No:

    WPIEA2013001

  • ISBN:

    9781475576443

  • ISSN:

    1018-5941

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