Rationality of Direct Tax Revenue Forecasts under Asymmetric Losses: Evidence from Swiss cantons
AbstractThe current debt crisis has shed light on the importance of accurate fiscal forecasts. In particular, the accuracy of revenue forecasts is central since they set the limit within which expenditure should remain in order to reach fiscal balance. Therefore, forecasting tax revenue accurately is a key step in the implementation of sound fiscal policies. The current paper contributes to the empirical literature on budget predictions by providing new evidence about Swiss cantons. Using data from 26 Swiss cantons over 1944-2010, we apply the method developed by Elliott et al. (2005) to test the rationality of direct tax revenue forecasts. We mainly find that 1) when considering the percent forecast error, loss functions are asymmetric in a majority of cantons, 2) allowing for asymmetric losses, results of rationality tests are substantially altered in the sense that more cantons turn out to produce rational forecasts 3) when considering forecasts of growth rates, almost no evidence of asymmetric loss function is found and finally 4) forecasts of tax revenue growth rate turn out to be rational in a higher number of cantons than forecasts of levels of tax revenue.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 13-324.
Length: 46 pages
Date of creation: Jan 2013
Date of revision:
Tax Revenue Forecasts; Rationality Tests; Asymmetric loss function; Swiss cantons;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.