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.
JEL-Codes:H62 H68 E37 E65
Keywords:Fiscal policy, Government debt, Forecast errors, Narrative economics
Forschungsbereich:Makroökonomie und öffentliche Finanzen