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The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area

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Author Info
Luca Onorante () (DG Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Diego J. Pedregal () (ETSI Industriales, Edificio Politécnico, Universidad de Castilla-la-Mancha, campus universitario s/n, 13071 Ciudad Real, Spain.)
Javier J. Pérez () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Sara Signorini () (Global Economics & FI/FX Research, HVB Milan, Via Tommaso Grossi 10, 20121 Milan, Italy.)

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Abstract

Short-term fiscal indicators based on public accounts data are often used by European policy makers. They represent one of the main sources of publicly available intra-annual fiscal information. Nevertheless, these indicators have received limited attention from the academic literature analysing fiscal forecasting in Europe. Some recent literature suggests the validity of public accounts data to forecast government deficits in the euro area. We extend this literature on two fronts: (i) we shift the focus from indicators of government deficits to look at indicators for government total revenue and total expenditure; (ii) we use a mixed-frequency state-space model to integrate readily available monthly/quarterly cash-based fiscal data with annual general government series (National Accounts). By doing so, we are able to maintain the focus on forecasting and monitoring annual outcomes, while making use of infra-annual fiscal information, available within the current year. The paper makes a case for the use of monthly cash indicators for multilateral fiscal surveillance at the European level. JEL Classification: C53, E6, H6.

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Paper provided by European Central Bank in its series Working Paper Series with number 901.

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Length: 41 pages
Date of creation: May 2008
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Handle: RePEc:ecb:ecbwps:20080901

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Related research
Keywords: Leading indicators; Fiscal forecasting and monitoring; Euro area.;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andrea Silvestrini & Matteo Salto & Laurent Moulin & David Veredas, 2008. "Monitoring and forecasting annual public deficit every month: the case of France," Empirical Economics, Springer, vol. 34(3), pages 493-524, June. [Downloadable!] (restricted)
  2. Pesaran, M Hashem & Timmermann, Allan, 1992. "A Simple Nonparametric Test of Predictive Performance," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 561-65, October.
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  3. Javier J. Pérez & Diego J. Pedregal, 2008. "Should quarterly government finance statistics be used for fiscal surveillance in Europe?," Working Paper Series 937, European Central Bank. [Downloadable!]
  4. Teresa Leal & Javier J. Pérez & Mika Tujula & Jean-Pierre Vidal, 2007. "Fiscal forecasting - lessons from the literature and challenges," Working Paper Series 843, European Central Bank. [Downloadable!]
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  5. Perez, Javier J., 2007. "Leading indicators for euro area government deficits," International Journal of Forecasting, Elsevier, vol. 23(2), pages 259-275. [Downloadable!] (restricted)
  6. Gonzalo Camba-Mendez & Ana Lamo, 2004. "Short-term monitoring of fiscal policy discipline," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(2), pages 247-265. [Downloadable!]
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  7. Fullerton, Thomas Jr., 1989. "A composite approach to forecasting state government revenues: Case study of the Idaho sales tax," International Journal of Forecasting, Elsevier, vol. 5(3), pages 373-380. [Downloadable!] (restricted)
  8. Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Javier J. Pérez & Diego J. Pedregal, 2008. "Should quarterly government finance statistics be used for fiscal surveillance in Europe?," Working Paper Series 937, European Central Bank. [Downloadable!]
  2. Teresa Leal Linares & Javier J. Pérez, 2009. "A temporal aggregation ARIMA model for forecasting and monitoring the public sector deficit," Hacienda Pública Española, IEF, vol. 190(3), pages 27-58, June. [Downloadable!]
  3. António Afonso & Luca Agnello & Davide Furceri & Ricardo M. Sousa, 2009. "Assessing Long-Term Fiscal Developments: a New Approach," Working Papers 2009/19, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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  4. Ricardo M. Sousa & António Afonso, 2009. "The Macroeconomic Effects of Fiscal Policy in Portugal: a Bayesian SVAR Analysis," NIPE Working Papers 3/2009, NIPE - Universidade do Minho. [Downloadable!]
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