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Disentangling political and institutional determinants of budget forecast errors: A comparative approach

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  • Boukari, Mamadou
  • Veiga, Francisco José

Abstract

This paper provides a unique comparison between French and Portuguese local governments with respect to the nature and determinants of budget forecast errors. It starts by documenting and comparing their statistical properties. The results point at biased and inefficient budget forecasts, which seem to have been more cautious in French departments than in Portuguese municipalities. Second, we examine the political, institutional and economic determinants of forecast biases. Overall, we find that they are essentially driven by electoral motivations and by institutional differences across the two countries. In particular, opportunistic forecasting is more prevalent where governments enjoy greater margin of maneuver, and there is evidence of conservatism in French departments where fiscal autonomy is greater.

Suggested Citation

  • Boukari, Mamadou & Veiga, Francisco José, 2018. "Disentangling political and institutional determinants of budget forecast errors: A comparative approach," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1030-1045.
  • Handle: RePEc:eee:jcecon:v:46:y:2018:i:4:p:1030-1045
    DOI: 10.1016/j.jce.2018.03.002
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    More about this item

    Keywords

    Fiscal forecasting; Opportunism; Elections; Institutions; Local governments; France; Portugal;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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