Just one week after a lackluster U.S. jobs report was released, indicating that economic recovery is proceeding at a snail’s pace, and just a day after the U.S. Congress made the decision not to take the country over the ‘fiscal-cliff,’ the International Monetary Fund’s (IMF) Chief Economist, Olivier Blanchard and colleague Daniel Leigh, released a working paper that has been seen as an unofficial apology. The paper shows how fiscal multipliers were consistently and severely underestimated in many of the economic growth forecasts of 2010. The underestimation of these multipliers led to projections from economist’s models that also underestimated the potentially negative impacts of austerity measures – policies designed to reduce government’s budget deficits by reducing government spending or increasing taxation. Austerity measures were implemented throughout the Eurozone crisis and remain hotly debated.

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