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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. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
  2. 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.
  3. 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.
  4. Forni, Lorenzo & Momigliano, Sandro, 2004. "Cyclical sensitivity of fiscal policies based on real-time data," MPRA Paper 4315, University Library of Munich, Germany.
  5. 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.
  6. Roel M. W. J. Beetsma & Xavier Debrun, 2003. "Reconciling Stability and Growth," IMF Working Papers 03/174, International Monetary Fund.
  7. repec:fth:coluec:754 is not listed on IDEAS
  8. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," NBER Working Papers 5556, National Bureau of Economic Research, Inc.
  9. Roel M. W. J. Beetsma & Xavier Debrun, 2004. "Reconciling Stability and Growth: Smart Pacts and Structural Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 431-456, November.
  10. 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.
  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. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  13. 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.
  14. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
  15. 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.
  16. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
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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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