Their track record is similar to the IMF’s, just that the IMF but now has issued a public “mea culpa” and admitted that their multipliers were too low. How an organization that verifiably got it so extremely wrong four years in a row is still followed when setting economic policy, is unclear to me.
From Jesse Frederik (guest post)
EU and ECB macro-economic policy is based upon predictions of economic growth. This means that they have to use an economic model which is fit for the task. But the model used by the European Union and defended by top-bureaucrat Olly Rehn is clearly wrong. As it does not fit the facts: it’s nine month ahead predictions (made in the spring of the year t-1) were wrong by a whopping between 6 and 8%-point margin of GDP. Not once – but four times in a stretch (graph).
The dismal quality of the ECB projections is a disaster which is wrecking Europe and which endangers the future of the Euro (and compromises the status of economics as a scientific discipline, M.K.). And, as they should have known better it’s an outright criminal. The main culprit is the low level of the ‘multiplier’ (about 0,5) in the models. The…
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