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Planned Fiscal Consolidations and Growth Forecast Errors – New Panel Evidence on Fiscal Multipliers

Author

Listed:
  • Belke Ansgar
  • Kronen Dominik
  • Osowski Thomas

    (Universitiy of Duisburg Essen, Universitätsstraße 12, 45117 Essen, Germany)

Abstract

This paper analyzes the effect of planned fiscal consolidation on GDP growth forecast errors from the years 2010-2013 using cross section analyses and fixed effects estimations. Our main findings are that fiscal multipliers have been underestimated in most instances for the year 2011 while we find little to no evidence for the years 2010 and especially the latter years 2012/13. Since the underestimation of fiscal multipliers seems to have decreased over time, it may indicate learning effects of forecasters. However, the implications for fiscal policy should be considered with caution as a false forecast of fiscal multipliers does not confirm that austerity is the wrong fiscal approach but only suggests a too optimistic assessment of fiscal multipliers for the year 2011.

Suggested Citation

  • Belke Ansgar & Kronen Dominik & Osowski Thomas, 2015. "Planned Fiscal Consolidations and Growth Forecast Errors – New Panel Evidence on Fiscal Multipliers," Review of Economics, De Gruyter, vol. 66(1), pages 47-70, April.
    • Handle: RePEc:lus:reveco:v:66:y:2015:i:1:p:47-70
    DOI: 10.1515/roe-2015-0104
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    Cited by:

    1. Piotr Ciżkowicz & Grzegorz Parosa & Andrzej Rzońca, 2022. "Fiscal tensions and risk premium," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 833-896, August.

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    More about this item

    Keywords

    Fiscal Multiplier; Austerity; Growth forecast errors; Panel econometrics;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G01 - Financial Economics - - General - - - Financial Crises

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