The Buchheit-Gulati paper is here.
Author: Philip Lane
Ashoka Mody (formerly IMF, now at Princeton) has a Project Syndicate article here.
Read Eamon Quinn’s WSJ interview with Michael Noonan here.
Chapters and summary version available here.
The dataset underlying the empirical exercise is available here.
The general message that the IMF on average underestimated the impact of fiscal austerity on output growth is plausible; it is also important to acknowledge that the cross-country correlation between the scale of fiscal austerity during 2010-2011 and growth forecast errors is far from perfect.
Of the 9 countries with expected fiscal tightening of greater than 1 percent of GDP in 2010-2011, there was certainly overoptimism about Greece, Romania, UK, Slovenia and Portugal (growth undershoots of 7.1 percent, 5.2 percent, 1.1 percent, 2.0 percent and 1.1 percent respectively). The growth undershoot for Ireland was 0.1 percent (ie close to zero), while Spain had a slight overshoot (+0.2 percent) and Belgium a larger overshoot (+1.7 percent).
The empirical exercise is linear so the results are also influenced by the nature of growth forecast errors in countries experiencing fiscal relaxation. Of the 5 countries with expected fiscal relaxation above 1 percent of GDP in 2010-2011, there were positive growth surprises for 4 countries (Finland +3.2 percent; Austria +2.4 percent; Cyprus +0.4 percent; Germany +3.7 percent) while Denmark had a small growth undershoot (-0.4 percent).
(All numbers rounded to 1 decimal place.)
It will be interesting to see updates of this work in relation to fiscal adjustment and growth performance in 2012.