Posts By Michael Burke

The importance of the debate on the IMF’s ‘multipliers’

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It is unusual for ‘academic’ research published by the IMF to find its way into popular media. But this has happened to the latest World Economic Outlook where the IMF deals briefly with the issue of ‘multipliers’ that is, the economic impact of changes in government spending.

The short article has caused an usually high level of commentary among economists and commentators because the data suggests that the multipliers are perhaps more than double the level generally implied by official research and forecasts. Nobel Laureate Paul Krugman has commented that the research shows that, ‘the reason for the worsening outlook is that policy makers have gotten the basic economics wrong’. In Britain Chris Giles economic editor of the Financial Times has led a counter-attack by questioning the validity of the research. A string of other commentators have joined the debate on both sides, including a Greek finance minister.

The key point in the IMF research is that the multipliers are much higher than previously thought by leading bodies such as the IMF, OECD and others. ‘The main finding, based on data for 28 economies, is that the multipliers used in generating [IMF] growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2….’ Whereas the IMF’s (and others) own forecasts implied a multiplier of 0.5, the actual multipliers may be in the range of 0.9 to 1.7.

It is useful to assess why this seemingly arcane debate has created such controversy and why that is taking place currently.

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Cancel the Greek Debt

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This article was originally published on Socialist Economic Bulletin on Saturday the 16th of June. The Greek general election on June 17 presents a clear political choice on whether to continue with the ‘austerity’ measures…

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Social Unrest and Government Policy

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This article was originally posted today on Socialist Economic Bulletin. There’s a very good piece on LabourList titled ‘Who Didn’t Predict a Riot?’ It lists many of the bodies or leading individuals who warned that deep…

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Panic on world markets

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International business news and other TV channels are offering a Babel-like interpretation of the current slump in world financial markets. European (including British) stations are reporting the Wall Street-led declines as a response to the…

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