Time-varying government spending foresight

Junjie Guo and Zhao Han

Journal of Economic Dynamics and Control, 2025, vol. 173, issue C

Abstract: Government spending forecast is noisy and displays time-varying uncertainties. Using the Survey of Professional Forecasters, we establish three stylized facts about disagreement regarding future discretionary government spending. A simple noise representation of foresight á laChahrour and Jurado (2018) featuring stochastic volatility captures these stylized facts. We analyze both qualitatively and quantitatively how the noisy foresight structure impacts the macroeconomy under different monetary-fiscal policy regimes. Time-varying fiscal foresight manifests its effect through non-zero noise shocks by generating state-dependent government spending multipliers.

Keywords: Fiscal foresight; Disagreement; Incomplete information; Belief-driven fluctuations; Government spending multipliers (search for similar items in EconPapers)
JEL-codes: C83 D83 D84 E32 E62 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:173:y:2025:i:c:s0165188925000338

DOI: 10.1016/j.jedc.2025.105067

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