Here's an interesting piece of statistical research from the IMF. Using an approach that does not use cyclically adjusted data (which they contend produces biased results) the authors find no quantitative evidence for the expansionary fiscal contractions, in fact the reverse:
'Our estimates imply that a 1 percent of GDP fiscal consolidation reduces real private consumption over the next two years by 0.75 percent, while real GDP declines by 0.62 percent.'
No big surprise for those of a Keynesian leaning and bad news for the UK government, which is expecting the private sector investment to rush in and (more than) fill the gap left by public sector demand.
