By Alexander Apostolides on October 25, 2012

Krugman appreciates economic history


Another excellent post on how 1930 multipliers are almost identical to current IMF estimates  suggesting a little stimulus perhaps mixed with some inflation will not hurt. I am less sure of this as a policy in southern Europe, were the governance system needs an overhaul in order to make stimulus effective, but glad to see Krugman inappropriate the research of economic historians.

It also speaks wonders for Demetriades, the Governor of the Cypriot Central bank, who is battling the IMF on arguing that the multiplier of fiscal spending cuts will not be 0.4 as the IMF suggests (which is insanely low, leading us to an underestimation of the GDP fall, but closer to 1.4. That is a battle of technicalities that can have such wide reprecussions that it is worth fighting for: well done to Dr. Demetriades for making a stand, and for using own IMF research to fight the low multiplier with.

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