Sebastian Barnes, Eddie Casey, 17 June 2019

Expenditure rules are an attractive way of keeping government spending on a steady path consistent with sustainable growth, but they rely on an estimate of potential output growth. Using data on the European Commission's past forecasts of both potential growth rates and actual output growth rates for 15 member states for the period 2004–2018, this column shows that there is a real danger of faulty potential output estimates leading to procyclical policy.

Events

CEPR Policy Research