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Improving fiscal policy in the EU: the case for independent forecasts

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Author Info

  • Lars Jonung
  • Martin Larch

Abstract

The evidence from several euro-area countries demonstrates the existence of a forecast bias in the budgetary process, which negatively affects fiscal performance. To remedy this bias, we suggest that forecasting should be assigned to an authority independent from the ministry of finance and the government, with the task of producing unbiased projections of growth and other variables crucial for the budgetary process.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 210.

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Length: 26 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:euf:ecopap:0210

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Related research

Keywords: independent forecasts; taxation; fiscal policy; forecast bias; forecasts; Jonung; Larch;

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References

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  1. Wren-Lewis, Simon, 2000. "The Limits to Discretionary Fiscal Stabilization Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 92-105, Winter.
  2. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
  3. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36 National Bureau of Economic Research, Inc.
  4. Willem H. Buiter & Clemens Grafe, 2004. "Patching up the Pact," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 67-102, 03.
  5. repec:fth:coluec:754 is not listed on IDEAS
  6. Rolf Strauch & Mark Hallerberg & Jürgen von Hagen, 2004. "Budgetary forecasts in Europe - the track record of stability and convergence programmes," Working Paper Series 307, European Central Bank.
  7. Roel M. W. J. Beetsma & Xavier Debrun, 2003. "Reconciling Stability and Growth: Smart Pacts and Structural Reforms," IMF Working Papers 03/174, International Monetary Fund.
  8. Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
  9. Forni, Lorenzo & Momigliano, Sandro, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," MPRA Paper 4315, University Library of Munich, Germany.
  10. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  11. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
  12. Lars Jonung, 2002. "EMU and the euro - the first 10 years. Challenges to the sustainability and price stability of the euro area - what does history tell us?," European Economy - Economic Papers 165, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  13. M. Buti & D. Franco & H. Ongena, 1997. "Budgetary Policies during Recessions - Retrospective Application of the "Stability and Growth Pact" to the Post-War Period," European Economy - Economic Papers 121, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  14. Bretschneider, Stuart I. & Gorr, Wilpen L. & Grizzle, Gloria & Klay, Earle, 1989. "Political and organizational influences on the accuracy of forecasting state government revenues," International Journal of Forecasting, Elsevier, vol. 5(3), pages 307-319.
  15. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  16. Alesina, A. & Perotti, R., 1995. "Fiscal Expansions and Adjustments in OECD Countries," Discussion Papers 1995_25, Columbia University, Department of Economics.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Vem ska göra prognoserna?
    by Martin Flodén in Ekonomistas on 2010-05-17 13:28:39
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