The Myth of Expansionary Austerity — Christian Breuer

In my new INET working paper, I revisit their method and identify a fatal fallacy of the case for expansionary austerity that by itself overturns the claims made for the view.
Statisticians call the mistake “reverse causality.” What it means, in this case, is that the statistical techniques adopted to test models of expansionary austerity fail to properly account for cyclical movements in the expenditure-GDP ratio. It follows that decreasing expenditure-GDP-ratios appear to cause an increase in GDP, instead of the the other way around....

Naked Capitalism
The Myth of Expansionary Austerity 

Christian Breuer, Junior Professor, Chemnitz University of Technology and Head of Wirtschaftsdienst and Intereconomics, zbw – the Leibniz Information Centre for Economics
Originally published at the Institute for New Economic Thinking website