Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 2018 erstellt
Beschreibung:
Is over-optimism about a country's future growth perspective good for an economy, or doesover-optimism also come with costs? In this paper we provide evidence that recessions, fiscalproblems, as well as Balance of Payment-difficulties are more likely to arise in countrieswhere past growth expectations have been overly optimistic. To examine this question, welook at the medium-run effects of instances of over-optimism or caution in IMF forecasts. Toisolate the causal effect of over-optimism we take an instrumental variables approach, wherewe exploit variation provided by the allocation of IMF Mission Chiefs across countries. As anecessary first step, we document that IMF Mission Chiefs tend to systematically differ intheir individual degrees of forecast-optimism or caution. The mechanism that transformsover-optimism into a later recession seems to run through higher debt accumulation, bothpublic and private. Our findings illustrate the potency of unjustified optimism and underlinethe importance of basing economic forecasts upon realistic medium-term prospects