An Evaluation of the OECD Cyclically-Adjusted Primary Government Balance Forecasts
AbstractForecasts of the cyclically-adjusted primary government balance are, potentially, informative as to the stance of future fiscal policies. This is sustained by the fiscal surveillance procedure for Eurozone members since the reformed Stability and Growth Pact of 2005. However, the quality of these forecasts has never been analyzed. We evaluate the properties of the December forecasts of the cyclically-adjusted primary government balance by the OECD for 19 countries. The forecasts for the current year, nowcasts, are reasonably accurate; the quality of the one-year-ahead and the two-year-ahead forecasts deteriorates however sharply when the forecast horizon increases. Despite their poor quality, forecasts are mostly unbiased and efficient and thus rational. Simple alternative forecasts for the cyclically-adjusted primary government balance do not systematically outperform the forecasts by the OECD.
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Bibliographic InfoArticle provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.
Volume (Year): 51 (2008)
Issue (Month): 4 ()
Macroeconomic forecasting; Monitoring forecasts; Regression; Statistical test; Government forecasting;
Find related papers by JEL classification:
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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