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Disentangling political and institutional determinants of budget forecast errors: A comparative approach

Author

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  • Mamadou Boukari

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Francisco José Veiga

    (Economics - Universidade do Minho)

Abstract

This paper provides a unique comparison between French and Portuguese local governments with respect to the nature and determinants of budget forecast errors. It starts by documenting and comparing their statistical properties. The results point at biased and inefficient budget forecasts, which seem to have been more cautious in French departments than in Portuguese municipalities. Second, we examine the political, institutional and economic determinants of forecast biases. Overall, we find that they are essentially driven by electoral motivations and by institutional differences across the two countries. In particular, opportunistic forecasting is more prevalent where governments enjoy greater margin of maneuver, and there is evidence of conservatism in French departments where fiscal autonomy is greater.

Suggested Citation

  • Mamadou Boukari & Francisco José Veiga, 2018. "Disentangling political and institutional determinants of budget forecast errors: A comparative approach," Post-Print hal-01817910, HAL.
  • Handle: RePEc:hal:journl:hal-01817910
    DOI: 10.1016/j.jce.2018.03.002
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01817910
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    Cited by:

    1. Picchio, Matteo & Santolini, Raffaella, 2020. "Fiscal rules and budget forecast errors of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 64(C).
    2. Bohn, Frank & Veiga, Francisco José, 2021. "Political forecast cycles," European Journal of Political Economy, Elsevier, vol. 66(C).
    3. Frank Bohn, 2018. "Political cycles: Beyond rational expectations," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-23, October.
    4. Frank Bohn & Francisco José Veiga, 2019. "Political Budget Forecast Cycles," NIPE Working Papers 12/2019, NIPE - Universidade do Minho.
    5. Igor Chugunov & Valentina Makohon, 2020. "Budgetary Projection In The System Of Financial And Economic Regulation Of Social Processes," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 6(1).

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    More about this item

    Keywords

    Fiscal forecasting ; Opportunism ; Elections ; Institutions ; Local governments ; France ; Portugal;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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