An amazing mea culpa from the IMF’s chief economist on austerity, by Howard Schneider

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/

IMF chief economist Olivier Blanchard writes that the fund misjudged the impact of austerity on European economies. (Stephen Jaffe/IMF)

IMF chief economist Olivier Blanchard writes that the fund misjudged the impact of austerity on European economies. (Stephen Jaffe/IMF)

Consider it a mea culpa submerged in a deep pool of calculus and regression analysis: The International Monetary Fund’s top economist today acknowledged that the fund blew its forecasts for Greece and other European economies because it did not fully understand how government austerity efforts would undermine economic growth.

The new and higly technical paper :  http://www.imf.org/external/pubs/cat/longres.aspx?sk=40200.0  looks again at the issue of fiscal multipliers – the impact that a rise or fall in government spending or tax collection has on a country’s economic output. Lire la suite