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Revenue Forecasting Practices: Differences across Countries and Consequences for Forecasting Performance

  • Thiess Buettner
  • Björn Kauder

    ()

This paper reviews the practice and performance of revenue forecasting in selected OECD countries. While the mean forecast errors are small in most countries, the precision of the forecasts measured by the standard deviation of the forecast error differs substantially across countries. Based on a comparison of forecasting practices we show that these differences can be attributed to a large part to differences in the timing of the forecasts and in the tax structure. In addition, we find some evidence that differences in methods and institutions also matter for the forecasting precision. In particular, we find that the use of macroeconomic models as well as the independence of revenue forecasting are associated with a lower standard deviation of the forecast error.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-04/cesifo1_wp2628.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2628.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2628
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  1. Lars Jonung & Martin Larch, 2006. "Improving fiscal policy in the EU: the case for independent forecasts," Economic Policy, CEPR;CES;MSH, vol. 21(47), pages 491-534, 07.
  2. Daniel R. Feenberg & William Gentry & David Gilroy & Harvey S. Rosen, 1988. "Testing the Rationality of State Revenue Forecasts," NBER Working Papers 2628, National Bureau of Economic Research, Inc.
  3. Bretschneider, Stuart I. & Gorr, Wilpen L. & Grizzle, Gloria & Klay, Earle, 1989. "Political and organizational influences on the accuracy of forecasting state government revenues," International Journal of Forecasting, Elsevier, vol. 5(3), pages 307-319.
  4. Auerbach, Alan J., 1999. "On the Performance and Use of Government Revenue Forecasts," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 765-82, December.
  5. Leal, Teresa & Pérez, Javier J. & Tujula, Mika & Vidal, Jean-Pierre, 2007. "Fiscal forecasting: lessons from the literature and challenges," Working Paper Series 0843, European Central Bank.
  6. Richard Boylan, 2008. "Political distortions in state forecasts," Public Choice, Springer, vol. 136(3), pages 411-427, September.
  7. Frits Bos, 2007. "The Dutch fiscal framework; history, current practice and the role of the CPB," CPB Document 150, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Tim Pike & David Savage, 1998. "Forecasting the public finances in the Treasury," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 49-62, February.
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