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Fiscal Fore casting in a Federal Country: Does Space Matter?

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Abstract

Federal countries such as Switzerland are often characterized by highly decentralized and autonomous fiscal institutions at the sub-national level while the corresponding regions are strongly integrated and interrelated economically. Therefore, correlations across cantons are expected to be important and to be an issue when it comes to the accuracy of fiscal forecasts. In this paper, we assess the performance of spatial econometric models to provide one-year ahead out-of-sample forecasts of cantonal personal tax revenue and compare the performance of these models to cantonal budgetary projections and other models. Results show that we manage to outperform budget projections in 8 out of 26.

Suggested Citation

  • Florian Chatagny & Christian Stettler, 2017. "Fiscal Fore casting in a Federal Country: Does Space Matter?," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 11(4), pages 51-60, December.
    • Handle: RePEc:kof:anskof:v:11:y:2017:i:4:p:51-60
    DOI: 10.3929/ethz-a-005427569
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    Keywords

    Fiscal forecasting; Fiscal federalism; Tax revenue; Spatial panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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