The determinants of macroeconomic forecasts and the Stability and Growth Pact
AbstractThis paper identifies the determinants of macroeconomic forecasts (budget balance, public debt and real GDP growth), of the governments of the 15 EU countries. We have used the forecasts of the Stability and Convergence Programmes submitted between 1998/99 and 2008/09 and the European Commission’s. Results show that, in general, economic growth forecasts submitted by European governments are more optimistic than those published by the European Commission. The lack of accuracy of government forecasts is due to “misinformation” regarding the economic situation at the time of their publication. The differences between observed and forecast changes of budget balance and public debt are explained by the output growth forecast errors and the forecasts of the changes in the two fiscal indicators. These forecast changes tend to revise downwards the changes submitted in the previous Program. Therefore, the governments’ “bad intention” seems to result from their lack of commitment to the objectives of previous programs and it explains the recurrent delays in the implementation of their fiscal consolidation plans.
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Bibliographic InfoPaper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2013/07.
Date of creation: Feb 2013
Date of revision:
Contact details of provider:
Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
European Union; Stability and Growth Pact; forecast errors;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H6 - Public Economics - - National Budget, Deficit, and Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-23 (All new papers)
- NEP-EEC-2013-03-23 (European Economics)
- NEP-FOR-2013-03-23 (Forecasting)
- NEP-MAC-2013-03-23 (Macroeconomics)
- NEP-PBE-2013-03-23 (Public Economics)
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