On the Macroeconomic Consequences of Over-Optimism

• 成果类型: Article
• 署名作者: Beaudry, Paul; Willems, Tim
• 署名单位: Bank of Canada; International Monetary Fund
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20190332
• 发表日期: 2022
• 页码: 38-59
• 关键词: instrumental variables; business cycles; debt; fluctuations; forecasts; banking; crises

摘要

Analyzing International Monetary Fund (IMF) data, we find that overly optimistic growth expectations for a country induce economic contractions a few years later. To isolate the causal effect, we take an instrumental variable approach-exploiting randomness in the country allocation of IMF mission chiefs. We first document that IMF mission chiefs differ in their individual degrees of forecast optimism, yielding quasi-experimental variation in the degree of forecast optimism at the country level. The mechanism appears to run through excessive accumulation of debt (public and private). Our findings illustrate the potency of unjustified optimism and underline the importance of basing economic forecasts upon realistic medium-term prospects.