Thread: Again on Greece
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Old May 24 2013, 05:40 PM   #13
Re: Again on Greece

I am not denying that the IMF is still to some degree the neoliberal institution we are familiar with. But there are cracks in the edifice. Take a look on p. 41 of this:

These results suggest that actual fiscal multipliers were larger than forecasters assumed. But what did forecasters assume about fiscal multipliers? Answering this question is complicated by the fact that not all forecasters make these assumptions explicit. Nevertheless, a number of policy documents, including IMF staff reports, suggest that fiscal multipliers used in the forecasting process are about 0.5. In line with these assumptions, earlier analysis by the IMF staff suggests that, on average, fiscal multipliers were near 0.5 in advanced economies during the three decades leading up to 2009.6
If the multipliers underlying the growth forecasts were about 0.5, as this informal evidence suggests, our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great Recession.

They corrected themselves and a multiplier (the effect of an increase of government spending upon GDP) of 0.9 - 1.7 is hardly what you would hear from austerians. They would probably say it is below one, zero or even negative (total crowding out plus negative incentive effects of the taxation that has to happen one day).

Everything I know about economics is orthodox economics (Minsky's famous Financial Instability paper is the only worthwhile heterodox stuff I ever read) and it didn't make me a neoliberal. Keynes was a centrist, he made money on the stock market, criticized Mark and basically wanted to save capitalism. Krugman, perhaps the most well-known contemporary popular economics writer and Old Keynesian, is a fairly orthodox economist. Blanchard, the chief economist of the IMF who is responsible for reports like the one I linked to above is a conventional economist. The guy wrote an influential New Keynesian paper in the eighties which provided one explaination for wage and price rigidities, his macro textbook features the good ol' Hicksian IS-LM model and now he is responsible for publications that suggest fiscal multipliers far above one.
In short, mainstream economics is pretty Keynesian.
The illegal we do immediately; the unconstitutional takes a little longer. - former US Secretary of State and unconvicted war criminal Henry Kissinger
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