Understanding and Confronting Uncertainty: Revisions to UK Government Expenditure Plans

Jagjit Chadha, Arno Hantzsche, Adrian Pabst (), Thomas Lazarowicz () and Garry Young

No 495, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: We develop a simple model that motivates fiscal stabilisation policy, in the presence of economic and control uncertainty. An examination of a real-time database of economic variables and forecasts shows that our knowledge of the current and future state of the economy is subject to significant revisions over time. Multi-year government spending plans are also significantly revised over successive fiscal events. We show the risk for any given government expenditure plan by constructing measures of historical expenditure revisions. We also show that the most significant factor in explaining public expenditure revisions are changes to the expected path of GDP growth. We illustrate how to model the components of public expenditure and are thus able to remark on the extent to which expenditure is warranted. Finally we report on findings from interviews with key policymakers in the past 25 years on how fiscal expenditure was managed and uncertainty confronted.

Keywords: expenditure control; monetary-fiscal interactions; revisions; uncertainty (search for similar items in EconPapers)
JEL-codes: C68 E32 E63 (search for similar items in EconPapers)
Date: 2018-10
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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