Bias in Official Fiscal Forecasts: Can Private Forecasts Help?

Jeffrey Frankel and Jesse Schreger
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Jesse Schreger: Harvard University and Princeton University

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: Government forecasts of GDP growth and budget balances are generally more over-optimistic than private sector forecasts. When official forecasts are especially optimistic relative to private forecasts ex ante, they are more likely also to be over-optimistic relative to realizations ex post. For example, euro area governments during the period 1999-2007 assiduously and inaccurately avoided forecasting deficit levels that would exceed the 3% Stability and Growth Pact threshold; meanwhile private sector forecasters were not subject to this crude bias. As a result, the budget-making process could probably be improved by using private-sector forecasts.

JEL-codes: E63 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Working Paper: Bias in Official Fiscal Forecasts: Can Private Forecasts Help? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:16-021

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