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Are official forecasts of output growth in the EU still biased?

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  • Cronin, David
  • McQuinn, Kieran

Abstract

An effective budgetary process requires accurate forecasts of future economic activity. Using data from Stability and Convergence Programmes and the European Commission’s Spring Forecasts, evidence is presented here which indicates deficiencies in official forecasting in the EU arising under the enhanced EU fiscal framework. Forecasts of output growth are unduly pessimistic, irrational, and influenced by recent economic activity. The article considers the reasons for and implications of such biases and proposes improvements to forecasting processes that could address these issues.

Suggested Citation

  • Cronin, David & McQuinn, Kieran, 2021. "Are official forecasts of output growth in the EU still biased?," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 337-349.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:2:p:337-349
    DOI: 10.1016/j.jpolmod.2020.12.001
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    References listed on IDEAS

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    Cited by:

    1. Tsuchiya, Yoichi, 2023. "Assessing the World Bank’s growth forecasts," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 64-84.
    2. Cronin, David & McQuinn, Kieran, 2023. "Government debt forecast errors and the net expenditure rule in EU countries: Undue optimism at a cost," Journal of Policy Modeling, Elsevier, vol. 45(6), pages 1113-1131.
    3. David Cronin & Niall McInerney, 2024. "Institutional Quality and Official Budgetary Forecast Performance in EU Member States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 80(2), pages 165-192.
    4. Cronin, David & McInerney, Niall, 2023. "Official fiscal forecasts in EU member states under the European Semester and Fiscal Compact – An empirical assessment," European Journal of Political Economy, Elsevier, vol. 76(C).

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    More about this item

    Keywords

    Official forecasts; Forecasting bias; EU fiscal rules;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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