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Fiscal sustainability and the accuracy of macroeconomic forecasts: do supranational forecasts rather than government forecasts make a difference?

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  • Carlos Fonseca Marinheiro

    ()
    (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)

Abstract

Credible fiscal plans that aim at restoring fiscal sustainability will be essential to counter the present increase in debt levels all across Europe. The macroeconomic scenario of such plans will be crucial. This paper assesses whether there is any advantage in delegating (part of) such power to supra-national forecasts. The evidence on the relative performance of the European Commission’s (EC) growth forecast is rather mixed, with considerable variation at the country level. Some national government forecasts (France, Italy, and Portugal) perform worse in terms of descriptive statistics than the EC forecast for all forecast horizons. For the year ahead the EC growth forecast is better than the official forecasts for almost ¾ of the EU-15 countries. All in all, since the EC forecast appears to be a good benchmark, in order to reduce the (optimistic) forecast bias, national governments could be forced to justify any large (optimistic) deviation from this benchmark when presenting their respective national stability and growth programmes.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2010-07.

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Length: 32 pages
Date of creation: May 2010
Date of revision:
Publication status: Published in Journal of Sustainable Economy 3(2): 185-209, 2011.
Handle: RePEc:gmf:wpaper:2010-07

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Keywords: Sustainability of public debt; Fiscal policy; Stability and Growth Pact; Fiscal forecasting; forecast evaluation; real-time data.;

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References

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Citations

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Cited by:
  1. Merola, Rossana & Pérez, Javier J., 2014. "Fiscal Forecast Errors: Governments Versus Independent Agencies?," Papers RB2014/1/1, Economic and Social Research Institute (ESRI).
  2. Georgia Kaplanoglou & Vassilis T. Rapanos, 2013. "Fiscal Deficits and the Role of Fiscal Governance: The case of Greece," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 43(1), pages 5-30, March.
  3. Frankel, Jeffrey A., 2011. "Over-optimism in Forecasts by Official Budget Agencies and its Implications," Scholarly Articles 8705906, Harvard Kennedy School of Government.
  4. Rossana Merola & Javier J. Pérez, 2012. "Fiscal forecast errors: governments vs independent agencies?," Banco de Espa�a Working Papers 1233, Banco de Espa�a.
  5. Frankel, Jeffrey A., 2011. "A Lesson from the South for Fiscal Policy in the US and Other Advanced Countries," Working Paper Series rwp11-014, Harvard University, John F. Kennedy School of Government.
  6. Frankel, Jeffrey, 2011. "A Solution to Overoptimistic Forecasts and Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Working Paper Series 11-012, Harvard University, John F. Kennedy School of Government.
  7. António Afonso & Jorge Silva, 2012. "The Fiscal Forecasting Track Record of the European Commission and Portugal," Working Papers Department of Economics 2012/37, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  8. Jeffrey Frankel, 2011. "A Solution to Fiscal Procyclicality: the Structural Budget Institutions Pioneered by Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 14(2), pages 39-78, August.

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