Growth Forecast Errors and Fiscal Multipliers

Olivier Blanchard and Daniel Leigh

American Economic Review, 2013, vol. 103, issue 3, 117-20

Abstract: 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. The relation is 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 in part reflect learning by forecasters and in part smaller multipliers than in the early years of the crisis.

JEL-codes: C53 E23 E27 E32 E62 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.3.117
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Citations: View citations in EconPapers (675)

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Working Paper: Growth Forecast Errors and Fiscal Multipliers (2013)
Working Paper: Growth Forecast Errors and Fiscal Multipliers (2013)
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