The Efficiency of the Government’s Revenue Projections

Natsuki Arai, Nobuo Iizuka and Yohei Yamamoto

No HIAS-E-122, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: This paper evaluates the efficiency of the Japanese fiscal authority’s revenue projections from 1960 to 2020 using real-time data. Revenue projections are not efficient, primarily due to the conditioning projections of output growth. By adjusting the forecasts based on the results of real-time forecast evaluations, this paper finds that the out-of-sample accuracy of the one-year-ahead projections could be significantly improved by a magnitude of up to 10 percent in root mean squared errors. The analysis of the disaggregated series suggests that corporate tax projections are the least efficient. The fiscal authority’s loss function is estimated to be asymmetric, making the underprediction of revenues more common.

Keywords: Revenue Projections; Japan; Forecast Evaluation; Out-of-Sample Forecast Accuracy (search for similar items in EconPapers)
JEL-codes: C53 E62 H68 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2022-09
New Economics Papers: this item is included in nep-for
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/74292/070_hiasDP-E-122.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-122

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