Growth Forecast Errors and Fiscal Multipliers¶
Blanchard, O., & Leigh, D. (2013). Growth Forecast Errors and Fiscal Multipliers.
Cited by¶
1 citation across 1 artifact.
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Domain-specific¶
- Paradox of Thrift
- This conditionality is what makes the paradox a diagnostic tool: the 2008–09 US recession, in which household saving rates rose sharply from about 2–2.5% of disposable income to a monthly peak of 7.8% in May 2009, averaging about 5.7% across that year, as wealth losses prompted precautionary behavior, and the Eurozone's 2010–13 coordinated fiscal consolidations, which Blanchard and Leigh (2013) showed were contractionary by larger-than-forecast multipliers
This sourceThe Eurozone limb only: across 26 European economies, forecasts made in spring 2010 for 2010-11 growth badly under-predicted the output cost of consolidation, implying multipliers far above the assumed 0.5; the US saving-rate figures in the same sentence are the BEA series, and the 2013 end-date overruns a paper whose panels reach 2012. The paper's own stated premise: official forecasters worked from a benchmark multiplier of about 0.5, the average of the October 2008 WEO estimates for 21 advanced economies over 1970-2007. The multiplier limb only: forecast errors across 26 European economies imply actual multipliers far above the assumed 0.5 (coefficient about -1); the paper makes no claim about debt-to-GDP ratios rising, which needs its own source.
Supported in partVerified against the source
- This conditionality is what makes the paradox a diagnostic tool: the 2008–09 US recession, in which household saving rates rose sharply from about 2–2.5% of disposable income to a monthly peak of 7.8% in May 2009, averaging about 5.7% across that year, as wealth losses prompted precautionary behavior, and the Eurozone's 2010–13 coordinated fiscal consolidations, which Blanchard and Leigh (2013) showed were contractionary by larger-than-forecast multipliers
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