Forecasting tax revenues in an emerging economy: The case of Albania

Ernil Sabaj and Mustafa Kahveci

MPRA Paper from University Library of Munich, Germany

Abstract: Fiscal balance is one of the main concerns of fiscal policy. Although academic and political choices on budget deficit vary due to perspective differences, improving the quality of revenue and expenditure forecasting has become prominent. The seminal researches on this topic present that tax revenue forecasts suffer from high positive biases. As tax forecasts have chain implications on the expenditures side as well, this might lead to high unexpected deficits. According to the IMF 2016 country report on Albania, emerging market economies are suffering higher than advanced ones in tax revenue forecasting. The aim of this paper is to implement new forecasting models and to apply forecast combinations for Albania, where forecast errors are higher than average. The estimation results show that influence of internal and external factors on tax revenue forecasting create a significant improvement on tax revenue accuracy. The estimations and forecast combinations of this paper perform lower errors than official forecasts, which indicate that revision of tax forecasting methodology can increase the accuracy of predictions for emerging market economies.

Keywords: Tax revenue; Forecasting; Combination; Emerging market (search for similar items in EconPapers)
JEL-codes: C52 C53 E27 E6 E62 H68 (search for similar items in EconPapers)
Date: 2018-02-07
New Economics Papers: this item is included in nep-for, nep-mac and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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