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Fiscal sustainability and the accuracy of macroeconomic forecasts: do supranational forecasts rather than government forecasts make a difference?

  • Carlos Fonseca Marinheiro


    (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal)

Credible fiscal plans that aim at restoring fiscal sustainability will be essential to counter the present increase in debt levels all across Europe. The macroeconomic scenario of such plans will be crucial. This paper assesses whether there is any advantage in delegating (part of) such power to supra-national forecasts. The evidence on the relative performance of the European Commission’s (EC) growth forecast is rather mixed, with considerable variation at the country level. Some national government forecasts (France, Italy, and Portugal) perform worse in terms of descriptive statistics than the EC forecast for all forecast horizons. For the year ahead the EC growth forecast is better than the official forecasts for almost ¾ of the EU-15 countries. All in all, since the EC forecast appears to be a good benchmark, in order to reduce the (optimistic) forecast bias, national governments could be forced to justify any large (optimistic) deviation from this benchmark when presenting their respective national stability and growth programmes.

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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2010-07.

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Length: 32 pages
Date of creation: May 2010
Date of revision:
Publication status: Published in Journal of Sustainable Economy 3(2): 185-209, 2011.
Handle: RePEc:gmf:wpaper:2010-07
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  1. Athanasios Orphanides & Simon van Norden, 2001. "The Unreliability of Output Gap Estimates in Real Time," CIRANO Working Papers 2001s-57, CIRANO.
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  8. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
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  10. Lars Jonung & Martin Larch, 2004. "Improving fiscal policy in the EU: the case for independent forecasts," European Economy - Economic Papers 210, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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