Fiscal targets. A guide to forecasters?

Gabriel Perez Quiros, Javier Pérez and Joan Paredes

No 1834, Working Paper Series from European Central Bank

Abstract: Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as published/announced by the government; (ii) incoming, observed data on the actual degree of implementation of ongoing plans. We formulate and estimate empirical models for a number of EU countries (Germany, France, Italy, and Spain) to show that government (consumption) targets convey useful information about ex-post policy developments when policy changes significantly (even if past credibility is low) and when there is limited information about the implementation of plans (e.g. at the beginning of a fiscal year). In addition, our models are instrumental to unveil the current course of policy in real-time. Our approach complements a well-established branch of the literature that finds politically-motivated biases in policy targets. JEL Classification: C54, H30, H68, E61, E62

Keywords: fiscal policy; forecasting; learning; policy credibility (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-mac
Note: 1389528
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Fiscal targets. A guide to forecasters? (2023)
Working Paper: Fiscal targets. A guide to forecasters? (2015)
Working Paper: Fiscal targets. A guide to forecasters? (2015)
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