Fiscal multipliers revisited

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Title: Fiscal multipliers revisited
Author: Ikonen, Pasi ; Saarenheimo, Tuomas ; Virén, Matti
Series: Bank of Finland. Bulletin. Monetary policy and the global economy
Series volume: 87
Series number: 4
Year of publication: 2013
Publication date: 5.9.2013
Pages: 59-64
Keywords: finanssipolitiikka; talouskasvu; euroalue; ennusteet; virheet; bkt; valtionvelka;
Abstract: During the past year, there has been intense debate over the correlation between fiscal consolidation and economic growth. This article argues that the observed growth forecast errors for euro area countries in 2010 2011 were not caused by underestimated fiscal multipliers. Instead, the errors were due to a general reassessment of euro area sovereign risk, which disproportionately impacted the more vulnerable euro area countries. These countries experienced a sharp increase in their sovereign borrowing costs, a tightening of credit conditions and ultimately a sharper-than-expected contraction of domestic demand.
Note: ISSN-L: 0784-6509 (painettu) ISSN: 1456-5870 (online).

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