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

Carlos Marinheiro ()

No 2010-07, GEMF Working Papers from GEMF, Faculty of Economics, University of Coimbra

Abstract: 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.

Keywords: Sustainability of public debt; Fiscal policy; Stability and Growth Pact; Fiscal forecasting; forecast evaluation; real-time data. (search for similar items in EconPapers)
JEL-codes: E17 E61 E62 H6 H68 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-05
New Economics Papers: this item is included in nep-eec, nep-for and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published in Journal of Sustainable Economy 3(2): 185-209, 2011.

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Persistent link: https://EconPapers.repec.org/RePEc:gmf:wpaper:2010-07

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