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An Empirical Analysis of the Canadian Budget Process

  • Bryan Campbell
  • Eric Ghysels

This paper provides a statistical analysis of the forecasts of a significant number of expenditure and revenue components of the federal budget provided each year by the Department of Finance. The sample available for such an investigation is limited, and the authors describe an easily applied non-parametric testing methodology that is more appropriate than the usual regression-based approach in small samples. The reliability and relative power of the various non-parametric tests are illustrated in a series of simulations. Applying these tests to the fiscal forecasts, they find that there is little cause to be concerned with the forecast performance of the Department of Finance over the last seventeen years.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 30 (1997)
Issue (Month): 3 (August)
Pages: 553-76

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Handle: RePEc:cje:issued:v:30:y:1997:i:3:p:553-76
Contact details of provider: Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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  1. Daniel R. Feenberg & William Gentry & David Gilroy & Harvey S. Rosen, 1988. "Testing the Rationality of State Revenue Forecasts," NBER Working Papers 2628, National Bureau of Economic Research, Inc.
  2. Friedman, Benjamin M., 1980. "Survey evidence on the `rationality' of interest rate expectations," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 453-465, October.
  3. Campbell, B. & Dufour, J.-M., 1991. "Over-Rejections in Rational Expectations Models: A Nonparametric Approach to the Mankiw-Shapiro Problem," Cahiers de recherche 9116, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  4. Dufour, J.M., 1979. "Rank Tests for Serial Dependence," Cahiers de recherche 7815, Universite de Montreal, Departement de sciences economiques.
  5. Gregory Mankiw, N. & Shapiro, Matthew D., 1986. "Do we reject too often? : Small sample properties of tests of rational expectations models," Economics Letters, Elsevier, vol. 20(2), pages 139-145.
  6. Mark S. Kamlet & David C. Mowery & Tsai-Tsu Su, 1987. "Whom do you trust? An analysis of executive and congressional economic forecasts," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(3), pages 365-384.
  7. Campbell, Bryan & Ghysels, Eric, 1995. "Federal Budget Projections: A Nonparametric Assessment of Bias and Efficiency," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 17-31, February.
  8. repec:cup:etheor:v:7:y:1991:i:2:p:253-63 is not listed on IDEAS
  9. Plesko, George A., 1988. "The Accuracy of Government Forecasts and Budget Projections," National Tax Journal, National Tax Association, vol. 41(4), pages 483-501, December.
  10. Benjamin M. Friedman, 1980. "Survey Evidence on The Rationality of Interest Rate Expectations," NBER Working Papers 0261, National Bureau of Economic Research, Inc.
  11. Marc Hallin & Jean-Marie Dufour, 1991. "Nonuniform bounds for nonparametric t-tests," ULB Institutional Repository 2013/2027, ULB -- Universite Libre de Bruxelles.
  12. Gentry, William M., 1989. "Do State Revenue Forecasters Utilize Available Information," National Tax Journal, National Tax Association, vol. 42(4), pages 429-39, December.
  13. Russell Davidson & James G. MacKinnon, 1994. "Graphical Methods for Investigating the Size and Power of Hypothesis Tests," Working Papers 903, Queen's University, Department of Economics.
  14. Cassidy, Glenn & Kamlet, Mark S. & Nagin, Daniel S., 1989. "An empirical examination of bias in revenue forecasts by state governments," International Journal of Forecasting, Elsevier, vol. 5(3), pages 321-331.
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