Singapore’s Recurrent Budget Surplus The Role of Conservative Growth Forecasts
AbstractAided by strong economic growth the Singapore government has been able to keep both the tax rate and the government expenditure rate low and yet generate healthy budget surpluses year after year. Although the gap between the tax rate and the government expenditure rate is the obvious source of the surplus, this paper shows the presence of another subtle source, a surplus generated by conservative growth forecasts that lay the base for revenue projections. An omitted variable bias in a model based on the tax smoothing hypothesis led us to consider the role played by the growth forecast error in predicting the budget surplus. Our computations show that on average the underprediction of the tax base (GDP) must have contributed about $376 million per year to the realized budget surplus over the period 1990-2005. This appears to be simply a byproduct of the Government’s philosophy of “fiscal prudence”.
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0704.
Length: 18 pages
Date of creation: Feb 2007
Date of revision:
Tax smoothing model; Reported and adjusted budget surplus; GDP forecast errors.;
Other versions of this item:
- Abeysinghe, Tilak & Jayawickrama, Ananda, 2008. "Singapore's recurrent budget surplus: The role of conservative growth forecasts," Journal of Asian Economics, Elsevier, vol. 19(2), pages 117-124, April.
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-FOR-2007-04-09 (Forecasting)
- NEP-PBE-2007-04-09 (Public Economics)
- NEP-SEA-2007-04-09 (South East Asia)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Le dollar Singapourien au plus haut face à l euro
by Loïc Abadie in Contrepoints on 2012-04-23 12:00:00
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