Boom-Year Savings and Budgetary Forecasting

Yilin Hou
Additional contact information
Yilin Hou: University of Georgia

Chapter Chapter 9 in State Government Budget Stabilization, 2013, pp 191-216 from Springer

Abstract: Abstract The forecasting of government expenditure and revenue is the outcome of complicated, often intense interaction between multiple key players in the budgeting process and multifarious aspects of government operations. The existing literature is very rich on the technical aspects but is relatively thin on the impact of institutions under the public choice perspective, especially those in financial administration, the budget stabilization fund (BSF) being a typical example. This chapter aims to fill in the niche by focusing on how BSF affects forecasting. BSF as a countercyclical fiscal policy tool was created as precautionary savings against revenue shortfalls, serving to reduce financial uncertainty from cyclical fluctuations. BSF is a formal institution with an underlying public choice motive to promote fiscal and budgetary transparency: BSF legislation is written to protect savings from political spending pressure and opportunistic electoral politics. However, public finance does not operate in vacuum; BSF cannot stay free of politics. Presence of savings inherently triggers complications in the politico-technical forecasting machine. This chapter examines state forecasts of their revenue with a BSF in place to see whether adopting BSF has any impact on forecast errors and how the structural features and size of BSF influence the forecasting behavior. I use a panel (49 states, ­1979/1988–2007) plus details of state BSF features, with controls for state demographics, economy, politics, and other budgetary institutions. This chapter will contribute to the public choice literature by providing evidence on the effects of BSF on behavioral changes of state governments in their revenue forecasts.

Keywords: Forecast Error; Economic Cycle; Political Business Cycle; General Fund; Revenue Forecast (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:stpchp:978-1-4614-6061-9_9

Ordering information: This item can be ordered from
http://www.springer.com/9781461460619

DOI: 10.1007/978-1-4614-6061-9_9

Access Statistics for this chapter

More chapters in Studies in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().