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The Political Economy of the Budget and Efficient Information Processing

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  • Ghysels, E.

Abstract

Every Year the Government Makes Up a Budget for the Forthcoming Fiscal Year. During the Budget Process, Projections Are Made of Expenditures and Ten Receipts Contingent Upon Predictions of Key Macroeconomic Variables. Naturally, One Expects That the Budget Deficit Or Surplus Actually Realized Will Differ From What Was Initially Announced. Neither of the Two Major Protagonists in the Budget Decision-Making Process, Namely the Legislative and Executive Branches of Government, May Have an Interest in Using Truthful Projections, However. It Is Found That 1) the Difference Between Projected and Realized Budgets Are Substantial; and 2) That the Differences Are Systematically Related to Publicly Available Information At the Time of the Bdget Announcement. the Publicy Available Information Contains Key Macroeconomic Variables As Well As Variables Related to the Electoral and Legislative Process. Finally, Tests Are Derived to Find Out What Information Released Throughout the Fiscal Year Is Useful to Update the Bias Assessment.

Suggested Citation

  • Ghysels, E., 1987. "The Political Economy of the Budget and Efficient Information Processing," Cahiers de recherche 8733, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:8733
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    Cited by:

    1. Jean Francois David & Eric Ghysels, 1989. "Y a-t-il des biais systematiques dans les annonces budgetaires canadiennes? (With English summary.)," Canadian Public Policy, University of Toronto Press, vol. 15(3), pages 313-321, September.

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    Keywords

    National Budget ; Projections;

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