Friday, December 31, 2010

Why Have Economists Been So Bad at Predicting the Impact of the Stimulus? - By Veronique de Rugy - The Corner - National Review Online

Almost two years after the adoption of the stimulus bill, the data shows that the funds didn’t stimulate GDP much, and didn’t stimulate employment either. One reason is that the package failed to prop up government purchases, or consumption purchases in general. For instance, as was the case with previous stimulus bills, it looks like most of the loan, grant, and contract money in the bill went to pay down state and local governments’ debt rather than buy stuff.

So why didn’t White House economists such as Christina Rommer or Moody’s Mark Zandi — two of the biggest stimulus enthusiasts out there — take these facts into considerations when predicting the impact of the stimulus?

Because their models are outdated and based on unrealistic assumptions.

Why Have Economists Been So Bad at Predicting the Impact of the Stimulus? - By Veronique de Rugy - The Corner - National Review Online

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