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Planning or Propaganda? An Evaluation of Germany's Medium-term Budgetary Planning

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  • Friedrich Heinemann

Abstract

In Germany, medium-term financial planning (Mifrifi) was introduced at the end of the sixties. This study scrutinizes the German federal government's experience of more than thirty years of financial planning. The paper begins by exploring the potential normative and political-economic driving forces behind fiscal projections. The following empirical analysis evaluates the forecasting quality of medium-term financial planing with regard to expenditures, taxes, and deficits. A model is tested that relates forecast budgetary trends to economic, institutional, and political-economic factors. Current financial planning is shown to be ineffective in making budgetary policy more predictable. Rather than promoting more credible and binding projections, the Maastricht Treaty appears to have encouraged even less realistic budgetary planning and overoptimistic financial projections in Germany. The policy conclusion suggests that responsibility for fiscal forecasts may need to be transferred to an independent institution.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 62 (2006)
Issue (Month): 4 (December)
Pages: 551-578

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200612)62:4_551:popaeo_2.0.tx_2-v

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Keywords: Mifrifi; budgetary planning; stability and growth pact;

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References

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  1. Strauch, Rolf & Hallerberg, Mark & von Hagen, Jürgen, 2004. "Budgetary forecasts in Europe - the track record of stability and convergence programmes," Working Paper Series 0307, European Central Bank.
  2. Francis X. Diebold & Jose A. Lopez, 1996. "Forecast Evaluation and Combination," NBER Technical Working Papers 0192, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. J. Ayuso-i-Casals & S. Deroose & E. Flores & L. Moulin, 2007. "The role of fiscal rules and institutions in shaping budgetary outcomes," European Economy - Economic Papers 275, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  2. Simon Luechinger & Christoph Schaltegger, 2013. "Fiscal rules, budget deficits and budget projections," International Tax and Public Finance, Springer, vol. 20(5), pages 785-807, October.
  3. Roel Beetsma & Benjamin Bluhm & Massimo Giuliodori & Peter Wierts, 2011. "From First-Release to Ex-Post Fiscal Data: Exploring the Sources of Revision Errors in the EU," Tinbergen Institute Discussion Papers 11-080/2, Tinbergen Institute.
  4. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers 07-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Roel Beetsma & Benjamin Bluhm & Massimo Giuliodori & Peter Wierts, 2011. "From First-Release to Ex-Post Fiscal Data: Exploring the Sources of Revision Errors in the EU," Tinbergen Institute Discussion Papers 11-080/2, Tinbergen Institute.
  6. Roy Batchelor, 2007. "Forecaster Behaviour and Bias in Macroeconomic Forecasts," Ifo Working Paper Series Ifo Working Paper No. 39, Ifo Institute for Economic Research at the University of Munich.
  7. Batchelor, Roy, 2007. "Bias in macroeconomic forecasts," International Journal of Forecasting, Elsevier, vol. 23(2), pages 189-203.

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