Fiscal targets. A guide to forecasters?

Joan Paredes, Javier Pérez and Gabriel Perez-Quirós ()
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Gabriel Perez-Quirós: Banco de España, AIREF and CEPR
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

No 1508, Working Papers from Banco de España

Abstract: Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as published/announced by the government; (ii) incoming, observed data on the actual degree of implementation of ongoing plans. We formulate and estimate empirical models for a number of EU countries (Germany, France, Italy and Spain) to show that government (consumption) targets convey useful information about ex-post policy developments when policy changes significantly (even if past credibility is low) and when there is limited information about the implementation of plans (e.g. at the beginning of a fiscal year). In addition, our models are instrumental in unveiling the current course of policy in real time. Our approach complements a well-established branch of the literature that finds politically motivated biases in policy targets.

Keywords: policy credibility; fiscal policy; forecasting (search for similar items in EconPapers)
JEL-codes: C54 E61 E62 H30 H68 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015-03
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Fiscal targets. A guide to forecasters? (2023)
Working Paper: Fiscal targets. A guide to forecasters? (2015)
Working Paper: Fiscal targets. A guide to forecasters? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1508

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