Fiscal Surprises at the FOMC

Dean Croushore and Simon van Norden ()

International Journal of Forecasting, 2019, vol. 35, issue 4, 1583-1595

Abstract: We examine a new set of U.S. fiscal forecasts from the FOMC briefing books. These forecasts are precisely those that were presented to monetary policymakers, and include frequently-updated estimates covering six complete business cycles and several fiscal-policy regimes. We detail the performances of forecast federal expenditures, revenues, surpluses, and structural surpluses in terms of their accuracy, bias, and efficiency. We find that forecast errors can be large economically, even at relatively short forecast horizons. While economic activity became less volatile after 1990, fiscal policy became harder to forecast. Finally, cyclically-adjusted deficit forecasts appear to be over-optimistic around both peaks and troughs of the business cycle, suggesting that fiscal policy is counter-cyclical in downturns and pro-cyclical in the early stages of recoveries.

Keywords: Fiscal policy; Deficits; Forecasting; FOMC; Greenbook (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Fiscal Surprises at the FOMC (2017)
Working Paper: FISCAL SURPRISES AT THE FOMC (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:35:y:2019:i:4:p:1583-1595

DOI: 10.1016/j.ijforecast.2019.02.009

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