The Political Economy of Revenue-Forecasting Experience From Low-Income Countries

Stephan Danninger, Annette Kyobe and M. Cangiano

No 2005/002, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes interference and timeliness in the revenue-forecasting process, using new data on revenue-forecasting practices in low-income countries. Interference is defined as the occurrence of a significant deviation from purely technical forecasts. A theoretical model explains forecasting interference through government corruption. The data broadly supports the model, and the results are robust to alternative explanations. The paper also constructs three indices-transparency, formality, and organizational simplicity-that characterize revenue-forecasting practices, and assesses their effectiveness in producing an upfront-that is, timely-budget envelope. More transparent and simple forecasting processes lead to early budget constraints, while formality has no measurable effect.

Keywords: WP; absolute value; estimation practice; forecasting Interference; revenue forecast; revenue forecasting; corruption; forecasting bias; country corruption; revenue-Forecasting practice; forecasting process; expenditure pressure; state capture; state forecaster; low-income country; government efficiency; expenditure pressure motive; budget submission; expenditure plan; Budget planning and preparation; Western Hemisphere; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 31
Date: 2005-01-01
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Citations: View citations in EconPapers (11)

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