Demand shocks that muffle investment are persistent: Relationship between cumulative forecast error for NRFI and fiscal consolidation in early recovery
| Country | y | x |
|---|---|---|
| AUT | -4.314 | -1.13325 |
| BEL | 11.04418 | 1.361767 |
| BGR | -45.6441 | 0.173259 |
| CAN | -4.73549 | 0.524523 |
| CHE | 9.884786 | -1.19615 |
| CZE | -15.5711 | 0.244519 |
| DEU | -3.45966 | -2.64445 |
| DNK | -0.02687 | -1.53195 |
| ESP | -20.9353 | 1.19464 |
| FIN | -26.507 | -0.96971 |
| FRA | -11.5668 | 0.403186 |
| GBR | -3.94964 | 1.666141 |
| GRC | -31.8991 | 5.29577 |
| ITA | -33.329 | 0.545954 |
| JPN | -5.20827 | 0.001999 |
| NLD | -11.4049 | -0.01833 |
| PRT | -29.2422 | 1.298319 |
| SVK | -1.38784 | 1.093786 |
| SVN | -53.064 | 1.65888 |
| USA | -20.4687 | 0.566275 |
Note: The scatterplot shows the cumulative shortfall in NRFI (the actual difference between actual and forecast investment) from 2010 to 2015 and the change in the structural fiscal balance in 2009 and 2010 for 20 countries. The positive relationship shows that an increase in the fiscal balance (or a reduction in fiscal deficits) targeted through policy changes (either spending cuts or tax increases) is positively related to a shortfall in forecast investment.
Source: Data are from Blanchard and Leigh (2013) and the World Bank World Development Indicators.
