Stock-flow consistent macro models

Many readers keep calling for my views on Austrian economics. Apparently when pushing what we might call the Modern Monetary Theory (MMT) view they get hit with a barrage of Austrian school criticism along the lines that statism is dread and that by privatising everything you will improve the human condition. My first thought when I get E-mails like this is to wonder where my readers hang out in their spare time! I wasn’t aware that the Austrian school was anything more than a cobbled together bunch about as large as the modern monetary school (laughing). Anyway, I am taking the request seriously and as a start I present some background – some modern monetary armaments. We are going to war.

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How much difference do the GDP forecasts make?

Some readers of yesterday’s blog – Why we need more fiscal stimulus, noted that I used IMF estimates of the real GDP growth over the next three years, which have been criticised for being too pessimistic relative the the RBA and the Treasury. They asked me to briefly summarise what the difference would be to the projections if the more optimistic RBA and Treasury forecasts were deployed. This short blog shows you that it doesn’t make much difference in terms of the evolution in unemployment and total labour utilisation. It is all bad.

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