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Fiscal Forecasts at the FOMC: Evidence from the Greenbooks

Author

Listed:
  • Dean Croushore

    (University of Richmond)

  • Simon van Norden

    (HEC Montréal)

Abstract

This paper examines fiscal policy forecasts prepared for the Federal Open Market Committee and its influence on U.S. monetary policy. The forecasts contain useful information beyond that in the CBO’s forecasts. Fiscal forecast errors are only weakly correlated with forecast errors for inflation and output growth, but those for the budget surplus are highly correlated with those for the unemployment rate and the output gap. Some fiscal variables can also account for a significant fraction of the “exogenous” changes in the federal funds rate target that Romer and Romer (2004) studied, consistent with the board’s statements on the importance of fiscal policy.

Suggested Citation

  • Dean Croushore & Simon van Norden, 2018. "Fiscal Forecasts at the FOMC: Evidence from the Greenbooks," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 933-945, December.
    • Handle: RePEc:tpr:restat:v:100:y:2018:i:5:p:933-945
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    Cited by:

    1. Cronin, David & McQuinn, Kieran, 2020. "Are official forecasts of output growth in the EU still biased? Evidence from stability and convergence programmes and the European Commission’s Spring forecasts," Papers WP681, Economic and Social Research Institute (ESRI).
    2. Carola Conces Binder & Rodrigo Sekkel, 2024. "Central bank forecasting: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 342-364, April.
    3. McQuinn, Kieran & O'Toole, Conor & O'Shea, Dónal, 2024. "Quarterly Economic Commentary, Winter 2024," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC2024WIN.
    4. Cronin, David & McQuinn, Kieran, 2020. "The (Pro-) Cyclicality of Fiscal Policy in the EU and Governments’ Expectations of Future Output Growth: New Evidence," Papers WP683, Economic and Social Research Institute (ESRI).
    5. Cronin, David & McQuinn, Kieran, 2021. "Are official forecasts of output growth in the EU still biased?," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 337-349.
    6. Jonathan J. Adams & Mr. Philip Barrett, 2023. "Identifying News Shocks from Forecasts," IMF Working Papers 2023/208, International Monetary Fund.
    7. Julien Champagne & Guillaume Poulin‐Bellisle & Rodrigo Sekkel, 2020. "Introducing the Bank of Canada staff economic projections database," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(1), pages 114-129, January.
    8. Galbraith, John W. & van Norden, Simon, 2019. "Asymmetry in unemployment rate forecast errors," International Journal of Forecasting, Elsevier, vol. 35(4), pages 1613-1626.
    9. Cronin, David & McQuinn, Kieran, 2023. "Government debt forecast errors and the net expenditure rule in EU countries: Undue optimism at a cost," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1113-1131.
    10. Tomás Marinozzi, 2023. "Forecasting Inflation in Argentina: A Probabilistic Approach," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(81), pages 81-110, May.
    11. Cronin, David & McGowan, Kieran, 2023. "Government debt forecast errors and the net expenditure rule in EU countries," Papers WP756, Economic and Social Research Institute (ESRI).
    12. Verma, Akhilesh Kumar & McQuinn, Kieran, 2024. "Assessing expectations of European house prices," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    13. David Cronin & Kieran McQuinn, 2021. "The (pro-) cyclicality of government consumption in the EU and official expectations of future output growth: new evidence," International Economics and Economic Policy, Springer, vol. 18(2), pages 331-345, May.
    14. Metodij Hadzi-Vaskov & Mr. Luca A Ricci & Alejandro M. Werner & Rene Zamarripa, 2021. "Authorities’ Fiscal Forecasts in Latin America: Are They Optimistic?," IMF Working Papers 2021/154, International Monetary Fund.
    15. Andrew C. Chang & Trace J. Levinson, 2023. "Raiders of the lost high‐frequency forecasts: New data and evidence on the efficiency of the Fed's forecasting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(1), pages 88-104, January.
    16. Julien Champagne & Guillaume Poulin-Bellisle & Rodrigo Sekkel, 2018. "Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts," Staff Working Papers 18-52, Bank of Canada.
    17. Joan Paredes & Javier J. Pérez & Gabriel Perez Quiros, 2023. "Fiscal targets. A guide to forecasters?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(4), pages 472-492, June.
    18. Pascal Goemans & Robinson Kruse‐Becher, 2025. "Time‐Varying US Government Spending Anticipation in Real Time," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 44(3), pages 867-880, April.
    19. Silvia Miranda-Agrippino & Giovanni Ricco, 2021. "The Transmission of Monetary Policy Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 74-107, July.
    20. Arai, Natsuki & Iizuka, Nobuo & Yamamoto, Yohei, 2024. "The efficiency of the Japanese government’s revenue projections," Economics Letters, Elsevier, vol. 244(C).
    21. Croushore, Dean & van Norden, Simon, 2019. "Fiscal Surprises at the FOMC," International Journal of Forecasting, Elsevier, vol. 35(4), pages 1583-1595.
    22. Arai, Natsuki, 2020. "Investigating the inefficiency of the CBO’s budgetary projections," International Journal of Forecasting, Elsevier, vol. 36(4), pages 1290-1300.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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