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Growth Forecast Errors and Fiscal Multipliers

Olivier Blanchard () and Daniel Leigh

No 18779, NBER Working Papers from National Bureau of Economic Research, Inc

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, 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.

JEL-codes: E32 E62 H20 H5 H68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-for, nep-mac and nep-pbe
Date: 2013-02
Note: EFG PE
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Published as Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-20, May.

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