Growth Forecast Errors and Fiscal Multipliers

2013/01/01 by Olivier J Blanchard, Olivier Blanchard, Daniel Leigh · 283 citations
Economics, Econometrics and Finance · #Computer science #Consolidation (business) #Econometrics #Economic Policies and Impacts #Economics #Finance #Fiscal Policies and Political Economy #Fiscal multiplier #Fiscal policy #Government spending #Keynesian economics #Macroeconomics #Market economy #Monetary Policy and Economic Impact #Monetary economics #Relation (database)

paper · open access · doi:10.1257/aer.103.3.117

published in American Economic Review 103(001), 1 (American Economic Association)

openalex publication_date 2013/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04

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.

Citations

• The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks

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