Austerity multipliers

16 Nov, 2012 at 13:58 | Posted in Economics | Comments Off on Austerity multipliers

OECD – like so many other mainstream economic establishment institutions – is all in for austerity:

The report making that case, the 2010 OECD Economic Outlook, made economic projections out through the last quarter of 2011. For a project I’m working on, I have compared those projections with what actually happened to selected countries; here’s what it looks like:

The harsh-austerity countries did much worse than the OECD was expecting.

This is similar to the IMF’s exercise, which convinced its staff that fiscal multipliers are not just positive — contractionary policy is contractionary — but bigger than they thought. So the OECD was terribly, terribly wrong and gave awful advice. I wonder if they have learned anything from the experience.

Paul Krugman

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