Fiscal Forecasts at the FOMC: Evidence from the Greenbooks

Dean Croushore and Simon van Norden ()

The Review of Economics and Statistics, 2018, vol. 100, issue 5, 933-945

Abstract: Abstract This paper examines fiscal policy forecasts prepared for the Federal Open Market Committee and its influence on U.S. monetary policy. The forecasts contain useful information beyond that in the CBO’s forecasts. Fiscal forecast errors are only weakly correlated with forecast errors for inflation and output growth, but those for the budget surplus are highly correlated with those for the unemployment rate and the output gap. Some fiscal variables can also account for a significant fraction of the “exogenous” changes in the federal funds rate target that Romer and Romer (2004) studied, consistent with the board’s statements on the importance of fiscal policy.

Date: 2018
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Working Paper: Fiscal Forecasts at the FOMC: Evidence from the Greenbooks (2016)
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