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Evaluating rationality of level and growth rate forecasts of direct tax revenues under flexible loss function: Evidence from Swiss cantons

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  • Chatagny, Florian
  • Siliverstovs, Boriss

Abstract

We explore the rationality of tax revenue forecasts in Swiss cantons under asymmetric loss functions. We find evidence of asymmetric losses for the level forecasts but not for growth rates. Allowing for asymmetric losses alters the outcome of rationality tests for the level forecasts.

Suggested Citation

  • Chatagny, Florian & Siliverstovs, Boriss, 2015. "Evaluating rationality of level and growth rate forecasts of direct tax revenues under flexible loss function: Evidence from Swiss cantons," Economics Letters, Elsevier, vol. 134(C), pages 65-68.
  • Handle: RePEc:eee:ecolet:v:134:y:2015:i:c:p:65-68
    DOI: 10.1016/j.econlet.2015.06.017
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    References listed on IDEAS

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    1. Bryan Campbell & Eric Ghysels, 1997. "An Empirical Analysis of the Canadian Budget Process," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 553-576, August.
    2. Feenberg, Daniel R, et al, 1989. "Testing the Rationality of State Revenue Forecasts," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 300-308, May.
    3. Reilly, Barry & Witt, Robert, 1992. "Are the Treasury's Tax Revenue Forecasts Rational?," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(4), pages 390-402, December.
    4. Mocan, H. Naci & Azad, Sam, 1995. "Accuracy and rationality of state General Fund Revenue forecasts: Evidence from panel data," International Journal of Forecasting, Elsevier, vol. 11(3), pages 417-427, September.
    5. Chatagny, Florian, 2015. "Incentive effects of fiscal rules on the finance minister's behavior: Evidence from revenue projections in Swiss Cantons," European Journal of Political Economy, Elsevier, vol. 39(C), pages 184-200.
    6. Graham Elliott & Allan Timmermann & Ivana Komunjer, 2005. "Estimation and Testing of Forecast Rationality under Flexible Loss," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1107-1125.
    7. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2015. "Central banks’ inflation forecasts under asymmetric loss: Evidence from four Latin-American countries," Economics Letters, Elsevier, vol. 129(C), pages 66-70.
    8. Chatagny, Florian, 2015. "Incentive effects of fiscal rules on the finance minister's behavior: Evidence from revenue projections in Swiss Cantons," European Journal of Political Economy, Elsevier, vol. 39(C), pages 184-200.
    9. Auerbach, Alan J., 1999. "On the Performance and Use of Government Revenue Forecasts," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(4), pages 765-782, December.
    10. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "On the loss function of the Bank of Canada: A note," Economics Letters, Elsevier, vol. 115(2), pages 155-159.
    11. Krüger, Jens J. & Hoss, Julian, 2012. "German business cycle forecasts, asymmetric loss and financial variables," Economics Letters, Elsevier, vol. 114(3), pages 284-287.
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    Cited by:

    1. repec:mhr:finarc:urn:sici:0015-2218(201706)73:2_213:mffeft_2.0.tx_2-2 is not listed on IDEAS
    2. Beate Jochimsen & Robert Lehmann, 2017. "On the political economy of national tax revenue forecasts: evidence from OECD countries," Public Choice, Springer, vol. 170(3), pages 211-230, March.
    3. Björn Kauder & Niklas Potrafke & Christoph Schinke, 2017. "Manipulating Fiscal Forecasts: Evidence from the German States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 73(2), pages 213-236, June.
    4. Beate Jochimsen & Robert Lehmann, 2017. "On the political economy of national tax revenue forecasts: evidence from OECD countries," Public Choice, Springer, vol. 170(3), pages 211-230, March.

    More about this item

    Keywords

    Tax revenue forecasts; Rationality tests; Asymmetric loss function; Swiss cantons;

    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

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