The ECB, Austerity and the Fiscal Multiplier: A meta-regression analysis of Fiscal Multiplier Estimates in ECB Policy Recommendations

Brüsewitz, Caspar Gerbrandt

The primary aim of this thesis is to examine whether the policy recommendations made by the European Central Bank in response to the financial crisis of 2008 were biased towards fiscal consolidation. It posits that such policies, commonly known as austerity, were underpinned by estimates of the fiscal multiplier that were lower than those of international and independent researchers. To analyse this, it provides a systematic overview of the ECB's fiscal multiplier estimates by performing a meta-regression analysis on all ECB working papers making multiplier estimates published between 1992 and 2012, and comparing the results against those of a larger dataset containing multiplier estimates made. It finds that the multiplier estimates of the ECB are significantly lower than the norm, which is potentially suggestive of bias. This thesis contributes to the literature on ideational bias in economic policy-making by providing a systematic literature review that helps inform the discussion on austerity in the EU. It also servers as a replication and expansion of previous meta-regression studies on the fiscal multiplier, by being the first study that specifically examines the estimates of a specific institution.

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