The Political Economy of the Budget and Efficient Information Processing

Eric Ghysels ()

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: Every Year the Government Makes Up a Budget for the Forthcoming Fiscal Year. During the Budget Process, Projections Are Made of Expenditures and Ten Receipts Contingent Upon Predictions of Key Macroeconomic Variables. Naturally, One Expects That the Budget Deficit Or Surplus Actually Realized Will Differ From What Was Initially Announced. Neither of the Two Major Protagonists in the Budget Decision-Making Process, Namely the Legislative and Executive Branches of Government, May Have an Interest in Using Truthful Projections, However. It Is Found That 1) the Difference Between Projected and Realized Budgets Are Substantial; and 2) That the Differences Are Systematically Related to Publicly Available Information At the Time of the Bdget Announcement. the Publicy Available Information Contains Key Macroeconomic Variables As Well As Variables Related to the Electoral and Legislative Process. Finally, Tests Are Derived to Find Out What Information Released Throughout the Fiscal Year Is Useful to Update the Bias Assessment.

Keywords: National Budget; Projections (search for similar items in EconPapers)
Pages: 26P pages
Date: 1987
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:8733

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