Combine to compete: improving fiscal forecast accuracy over time

Laura Carabotta () and Peter Claeys

No 2015/320, UB School of Economics Working Papers from University of Barcelona School of Economics

Abstract: Budget forecasts have become increasingly important as a tool of fiscal management to influence expectations of bond markets and the public at large. The inherent difficulty in projecting macroeconomic variables – together with political bias – thwart the accuracy of budget forecasts. We improve accuracy by combining the forecasts of both private and public agencies for Italy over the period 1993-2012. A weighted combined forecast of the deficit/ ratio is superior to any single forecast. Deficits are hard to predict due to shifting economic conditions and political events. We test and compare predictive accuracy over time and although a weighted combined forecast is robust to breaks, there is no significant improvement over a simple RW model.

Keywords: deficit; forecast accuracy; fiscal forecasting; forecast comparison; forecast combination; fluctuation test. (search for similar items in EconPapers)
JEL-codes: C14 E43 E62 G12 H62 H63 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Combine to compete: Improving fiscal forecast accuracy over time (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ewp:wpaper:320web

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