Empirica – Journal of European Economics

Sponsored by the Austrian Economic Association and the Austrian Institute of Economic Research

Empirica publishes empirical and theoretical work on all economic aspects of European Integration. The topics may range from all challenges concerning the deepening of the European Union (Single Market, Lisbon Agenda, EMU) to enlargement and the external relations of the EU (globalisation).

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Florian Brugger, Jörn Kleinert
The strong increase of Austrian government debt in the Kreisky era: Austro-Keynesianism or just stubborn forecast errors?
Empirica, 2019, 46(2), S.229-248, http://www.springer.com/10663
In the Kreisky era (1970-1983), Austrian government debts increased strongly. Historically, the attitude of Kreisky and the Social Democrats towards Keynesian fiscal policy measures to fight unemployment during the oil crises has been held to be responsible for the successive budget deficits. Kreisky's ideological debt policy has become a narrative that has strongly influenced Austrian fiscal policy until today. While this explanation for the strong increase in public debt during the Kreisky era is widely accepted, it is not necessarily true. In this paper, we assess a different explanation: the deficits might simply have resulted from forecast errors of GDP growth in those turbulent times. We find that about one-third of the increase in the debt-over-GDP ratio is directly explained by short-run forecast errors, i.e., the difference between the approved and the realised budget, and an additional one-fifth is the lower bound of forecast error regarding the long-run growth rate.
Forschungsbereich:Makroökonomie und europäische Wirtschaftspolitik
Sprache:Englisch

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Univ.-Prof. Mag. Dr. Fritz Breuss

Funktion: Wissenschaftlicher Mitarbeiter, Managing Editor Empirica