On the Performance and Use of Government Revenue Forecasts
This paper considers the performance of government forecasts--by the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB)--from the standpoint of bias and efficiency. The results are mixed. On the one hand, their performance has not differed significantly from that of a private forecaster, Data Resources, Inc. (DRI). Further, even when the sample period is broken down into "pessimistic" and "optimistic" periods, forecast errors have such large standard errors that it is difficult to conclude that the forecasts exhibit any underlying bias. On the other hand, the government forecasts fail statistical tests of efficiency. In particular, forecast revisions exhibit significant serial correlation and strong seasonality. These results suggest that government revenue forecasts could, in principle, convey more information than they do at present. Also, the large standard errors of the forecasts stand at odds with the use of point estimates for policy purposes. Because the budget process ignores forecast uncertainty, the "best" forecasts for budget purposes need not be the most accurate point estimates; it might well be appropriate, for example, for forecasts to reflect a pessimistic bias. Thus, the requirements of forecast efficiency and those of a poorly conceived budget process are inconsistent.
(This abstract was borrowed from another version of this item.)
|Date of creation:||20 Jul 1999|
|Date of revision:|
|Contact details of provider:|| Postal: Boalt Hall, Berkeley, CA 94720|
Fax: (510) 642-3767
Web page: http://www.escholarship.org/repec/blewp/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
- Campbell, Bryan & Ghysels, Eric, 1995. "Federal Budget Projections: A Nonparametric Assessment of Bias and Efficiency," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 17-31, February.
- Bengt Holmstrom, 1982.
"Moral Hazard in Teams,"
Bell Journal of Economics,
The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
When requesting a correction, please mention this item's handle: RePEc:cdl:oplwec:qt8h845262. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.