The political economy of EDP fiscal forecasts: An empirical assessment
AbstractWe analyse the budget balance forecasts prepared by 15 European countries in their Excessive Deficit Procedure reportings, studying the statistical properties of forecast errors and their politico-institutional determinants. Forecast errors are responsive to growth surprises, fiscal institutions and opportunistic motivations: upcoming elections induce over-optimism, most apparent when the opposition wins, whereas commitment or mixed forms of fiscal governance and numerical expenditure rules (unlike deficit and debt rules) are associated to greater prudence. The main findings hold when using forecasts from national draft budgets. Taking subsamples reveals that opportunistic and institutional effects are only significant under the Stability and Growth Pact.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Political Economy.
Volume (Year): 27 (2011)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505544
Fiscal forecasting Stability and Growth Pact Excessive Deficit Procedure Fiscal rules;
Other versions of this item:
- Álvaro Pina & Nuno Venes, 2007. "The Political Economy of EDP Fiscal Forecasts: An Empirical Assessment," Working Papers Department of Economics 2007/23, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
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