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Overreliance in Automatic Stabilizers? - Sweden’s Fiscal Policy during the Financial Crisis

Kolhammar, Jens LU (2014) NEKH01 20141
Department of Economics
Abstract (Swedish)
What was the outcome of Sweden’s fiscal policy between 2009 and 2012 and why was it different from forecasts? Research by the OECD during the financial crisis, used by the Swedish Government to illustrate their fiscal policy, suggested that Sweden would have the biggest stimulus of all OECD countries. However, Sweden’s fiscal policy ended up rather modest. By examining the forecasted fiscal policy with the outcome I find that the Government systematically underestimated its income. By using a simple regression I find correlation between the forecast errors in GDP growth and forecast error in budget balance. Also, by looking at specific budget post I show that a big part of the miscalculations comes from overestimating the overall cost of... (More)
What was the outcome of Sweden’s fiscal policy between 2009 and 2012 and why was it different from forecasts? Research by the OECD during the financial crisis, used by the Swedish Government to illustrate their fiscal policy, suggested that Sweden would have the biggest stimulus of all OECD countries. However, Sweden’s fiscal policy ended up rather modest. By examining the forecasted fiscal policy with the outcome I find that the Government systematically underestimated its income. By using a simple regression I find correlation between the forecast errors in GDP growth and forecast error in budget balance. Also, by looking at specific budget post I show that a big part of the miscalculations comes from overestimating the overall cost of the automatic stabilizers. The research shows that relying on automatic stabilizers as the biggest part of a country’s fiscal policy is problematic as it is dependent on forecasts. (Less)
Please use this url to cite or link to this publication:
author
Kolhammar, Jens LU
supervisor
organization
course
NEKH01 20141
year
type
M2 - Bachelor Degree
subject
keywords
Fiscal Policy, Automatic Stabilizers, Forecasts of Fiscal Policy, Sweden’s Fiscal Policy.
language
English
id
4461425
date added to LUP
2014-06-23 22:12:08
date last changed
2014-06-23 22:12:08
@misc{4461425,
  abstract     = {{What was the outcome of Sweden’s fiscal policy between 2009 and 2012 and why was it different from forecasts? Research by the OECD during the financial crisis, used by the Swedish Government to illustrate their fiscal policy, suggested that Sweden would have the biggest stimulus of all OECD countries. However, Sweden’s fiscal policy ended up rather modest. By examining the forecasted fiscal policy with the outcome I find that the Government systematically underestimated its income. By using a simple regression I find correlation between the forecast errors in GDP growth and forecast error in budget balance. Also, by looking at specific budget post I show that a big part of the miscalculations comes from overestimating the overall cost of the automatic stabilizers. The research shows that relying on automatic stabilizers as the biggest part of a country’s fiscal policy is problematic as it is dependent on forecasts.}},
  author       = {{Kolhammar, Jens}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Overreliance in Automatic Stabilizers? - Sweden’s Fiscal Policy during the Financial Crisis}},
  year         = {{2014}},
}