Growth Forecast Errors and Government Investment and Consumption Multipliers
CEIS Research Paper
We compare the government investment and government consumption multipliers in the advanced economies during the recent fiscal consolidation, following the Blanchard and Leigh (2013) approach. We fi nd that, in the highly-indebted countries, the investment multplier is likely to be much higher than what has been assumed by the policy makers and much higher that the consumption multiplier. This points out that the consolidation should be accompanied by increased public investment.
Keywords: fi scal consolidation, fi scal multiplier, public consumption, public investment, public debt
JEL codes: E52, E62, E63, G01
Date: Tuesday 17 December 2013
Revision Date: Tuesday 17 December 2013