I have wondered what had happened to the Treasury official who did a rather dodgy analysis ‘proving’ the stimulus worked by truncating the sample (see here). If reports in the AFR are correct that person now works at the IMF.
From this it concluded that its estimate of the damage done by fiscal consolidation was too small because deficit reduction was more painful when interest rates were near zero and other countries were also consolidating budgets.
But in publishing a chart, the IMF’s work appeared to be highly dependent on Greece and Germany so the Financial Times tried to replicate it. More examination found that the full set of data did not exist on the IMF’s website. The IMF had included Romania, Bulgaria, Hungary, Poland and South Korea but excluded New Zealand and some EU countries with successful deficit reduction strategies such as Estonia, Latvia and Lithuania.
The fund had good reasons – the Christchurch earthquake in February 2011 – for excluding New Zealand but similar stories about outliers could be told for other countries, particularly Greece and Germany.
For the countries where the full data are available on the IMF website, the results lose statistical significance if Greece and Germany are excluded.
Moreover, the results were presented as general but are limited to the specific time period chosen. The 2010 forecasts of deficits were not good predictors of errors in growth forecasts for 2010 or 2011 when the years were analysed individually. Its 2011 forecasts were not good predictors of anything.
Well yes. The thing to remember is that both the World Bank and the IMF have had no reason to exist since the Bretton Woods system collapsed.