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A toolkit to strengthen government budget surveillance

Author

Listed:
  • Diego J. Pedregal

    () (U. Castilla la Mancha)

  • Javier J. Pérez

    () (Banco de España)

  • A. Jesús Sánchez-Fuentes

    () (U. Complutense de Madrid)

Abstract

In this paper we develop a comprehensive short-term fiscal forecasting system of use for the real-time monitoring of the Spanish government’s borrowing requirement. Spain has been at the centre of the recent European sovereign debt crisis, not least because of sizeable failures in meeting public deficit targets. The system comprises a suite of models, with different levels of disaggregation (bottom-up vs top-down; general government vs sub-sectors), which are suitable for the automatic processing of the large amount of monthly/quarterly fiscal data currently published by the Spanish statistical authorities. Our tools are instrumental in the ex-ante detection of risks to official projections, and can thus help reduce the ex-post reputational costs of budgetary slippage. On the basis of our results, we discuss how official monitoring bodies could expand, on one hand, their toolkit to evaluate regular adherence to targets (moving beyond a legalistic approach) and, on the other, their communication policies as regards sources of risks to (ex-ante) compliance with budgetary targets.

Suggested Citation

  • Diego J. Pedregal & Javier J. Pérez & A. Jesús Sánchez-Fuentes, 2014. "A toolkit to strengthen government budget surveillance," Working Papers 1416, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1416
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/14/Fich/dt1416e.pdf
    File Function: First version, July 2014
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    References listed on IDEAS

    as
    1. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    2. Litterman, Robert B, 1983. "A Random Walk, Markov Model for the Distribution of Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 169-173, April.
    3. Andrea Silvestrini & Matteo Salto & Laurent Moulin & David Veredas, 2008. "Monitoring and forecasting annual public deficit every month: the case of France," Empirical Economics, Springer, vol. 34(3), pages 493-524, June.
    4. Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
    5. Pina, Álvaro M. & Venes, Nuno M., 2011. "The political economy of EDP fiscal forecasts: An empirical assessment," European Journal of Political Economy, Elsevier, vol. 27(3), pages 534-546, September.
    6. Michael Artis & Massimiliano Marcellino, 2001. "Fiscal forecasting: The track record of the IMF, OECD and EC," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 20-36.
    7. Warmedinger, Thomas & Paredes, Joan & Asimakopoulos, Stylianos, 2013. "Forecasting fiscal time series using mixed frequency data," Working Paper Series 1550, European Central Bank.
    8. Jeffrey Frankel & Jesse Schreger, 2013. "Over-optimistic official forecasts and fiscal rules in the eurozone," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(2), pages 247-272, June.
    9. Tommaso Proietti & Filippo Moauro, 2006. "Dynamic factor analysis with non-linear temporal aggregation constraints," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 55(2), pages 281-300.
    10. Paredes, Joan & Pedregal, Diego J. & Pérez, Javier J., 2009. "A quarterly fiscal database for the euro area based on intra-annual fiscal information," Working Paper Series 1132, European Central Bank.
    11. John Clark & Caroline Gibbons & Susan Morrissey & Joshua Pooley & Emily Pye & Rhett Wilcox & Luke Willard, 2013. "Estimates of uncertainty around budget forecasts," Treasury Working Papers 2013-04, The Treasury, Australian Government, revised Nov 2013.
    12. Filippo Moauro & Giovanni Savio, 2005. "Temporal disaggregation using multivariate structural time series models," Econometrics Journal, Royal Economic Society, vol. 8(2), pages 214-234, July.
    13. Litterman, Robert B, 1983. "A Random Walk, Markov Model for the Distribution of Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(2), pages 169-173, April.
    14. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 05/225, International Monetary Fund.
    15. Gomez, Nicolas & Guerrero, Victor M., 2006. "Restricted forecasting with VAR models: An analysis of a test for joint compatibility between restrictions and forecasts," International Journal of Forecasting, Elsevier, vol. 22(4), pages 751-770.
    16. Onorante, Luca & Pedregal, Diego J. & Pérez, Javier J. & Signorini, Sara, 2010. "The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 98-119, January.
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    Citations

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    Cited by:

    1. Francisco Martí & Javier J. Pérez, 2015. "Spanish Public Finances through the Financial Crisis," Fiscal Studies, Institute for Fiscal Studies, vol. 36, pages 527-554, December.
    2. Castillo-Manzano, José I. & Pedregal, Diego J. & Pozo-Barajas, Rafael, 2016. "An econometric evaluation of the management of large-scale transport infrastructure in Spain during the great recession: Lessons for infrastructure bubbles," Economic Modelling, Elsevier, vol. 53(C), pages 302-313.
    3. Sabaj, Ernil & Kahveci, Mustafa, 2018. "Forecasting tax revenues in an emerging economy: The case of Albania," MPRA Paper 84404, University Library of Munich, Germany.

    More about this item

    Keywords

    government accountability; transparency; fiscal Forecasting.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access

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