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Testing the Rationality of State Revenue Forecasts

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  • Feenberg, Daniel R, et al

Abstract

Recent revenue shortfalls in several states focus attention on the question of whether states do a "good" job of forecasting revenues. In modern economics, forecasts are evaluated on the basis of whether or not they are "rational"--do the forecasts optimally incorporate all available information? This paper develops a method for testing the rationality of state revenue forecasts, and applies it to the analysis of data from New Jersey, Massachusetts, and Maryland. One of the main findings is that in all three states, the forecasts of own revenues are systematically biased downward.- U3- Coauthors are William Gentry, David Gilroy, and Harvey S. Rosen. Copyright 1989 by MIT Press.

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  • 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.
  • Handle: RePEc:tpr:restat:v:71:y:1989:i:2:p:300-308
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    References listed on IDEAS

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    1. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-124, March.
    2. John H. Kareken, 1983. "Deposit insurance reform or deregulation is the cart, not the horse," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
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    4. B. Douglas Bernheim, 1989. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Chapters,in: The Economics of Aging, pages 335-358 National Bureau of Economic Research, Inc.
    5. Leonard, Jonathan S, 1982. "Wage Expectations in the Labor Market: Survey Evidence on Rationality," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 157-161, February.
    6. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
    7. N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
    8. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    9. Zarnowitz, Victor, 1985. "Rational Expectations and Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 293-311, October.
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