IDEAS home Printed from https://ideas.repec.org/a/pal/compes/v58y2016i2p226-253.html
   My bibliography  Save this article

Fiscal Forecasts and Slippages: The Role of the SGP and Domestic Fiscal Frameworks

Author

Listed:
  • Patrícia Martins

    (Department of Economics, Sociology and Management (DESG), Centre for Transdisciplinary Development Studies (CETRAD), University of Trás-os-Montes and Alto Douro (UTAD), Escola de Ciências Humanas e Sociais – Polo II, Vila Real 5000-801, Portugal)

  • Leonida Correia

    (Department of Economics, Sociology and Management (DESG), Centre for Transdisciplinary Development Studies (CETRAD), University of Trás-os-Montes and Alto Douro (UTAD), Escola de Ciências Humanas e Sociais – Polo II, Vila Real 5000-801, Portugal)

Abstract

This paper studies the determinants of budget balance, public debt, and gross domestic product growth forecasts presented in the Stability and Convergence Programs for 15 European countries and respective forecasting errors for the period 1999–2009. Our results suggest that governments were more engaged in the preparation of budget balance forecasts than public debt forecasts because of the definition and application of the Stability and Growth Pact. Economic forecasts submitted by governments are generally more optimistic than those of the European Commission, but the inaccuracy is because of information problems. Countries with better domestic institutional frameworks publish more prudent economic forecasts.

Suggested Citation

  • Patrícia Martins & Leonida Correia, 2016. "Fiscal Forecasts and Slippages: The Role of the SGP and Domestic Fiscal Frameworks," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 58(2), pages 226-253, June.
    • Handle: RePEc:pal:compes:v:58:y:2016:i:2:p:226-253
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/ces/journal/v58/n2/pdf/ces201530a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/ces/journal/v58/n2/full/ces201530a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    2. Pina, Álvaro M. & Venes, Nuno M., 2011. "The political economy of EDP fiscal forecasts: An empirical assessment," European Journal of Political Economy, Elsevier, vol. 27(3), pages 534-546, September.
    3. Jeffrey Frankel & Jesse Schreger, 2013. "Over-optimistic official forecasts and fiscal rules in the eurozone," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(2), pages 247-272, June.
    4. Xavier Debrun & David Hauner & Manmohan S. Kumar, 2009. "Independent Fiscal Agencies," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 44-81, February.
    5. Lars Jonung & Martin Larch, 2006. "Improving fiscal policy in the EU: the case for independent forecasts [‘Fiscal forecasting: The track record of the IMF, OECD and EC’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(47), pages 492-534.
    6. Richard Morris & Hedwig Ongena & Ludger Schuknecht, 2006. "The reform and implementation of the Stability and Growth Pact," Occasional Paper Series 47, European Central Bank.
    7. Rolf Strauch & Mark Hallerberg & Jürgen von Hagen, 2004. "Budgetary Forecasts in Europe – The Track Record of Stability and Convergence Programmes," Economic Working Papers at Centro de Estudios Andaluces E2004/42, Centro de Estudios Andaluces.
    8. Giuliodori, Massimo & Beetsma, Roel, 2008. "On the relationship between fiscal plans in the European Union: An empirical analysis based on real-time data," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 221-242, June.
    9. Niels Gilbert & Jasper de Jong, 2014. "Does the Stability and Growth Pact induce a bias in the EC's fiscal forecasts," DNB Working Papers 451, Netherlands Central Bank, Research Department.
    10. Tilman Brück & Andreas Stephan, 2006. "Do Eurozone Countries Cheat with their Budget Deficit Forecasts?," Kyklos, Wiley Blackwell, vol. 59(1), pages 3-15, February.
    11. Milesi-Ferretti, Gian Maria & Moriyama, Kenji, 2006. "Fiscal adjustment in EU countries: A balance sheet approach," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3281-3298, December.
    12. Álvaro M. Pina, 2009. "Elusive Counter-Cyclicality and Deliberate Opportunism? Fiscal Policy from Plans to Final Outcomes," Working Papers w200906, Banco de Portugal, Economics and Research Department.
    13. Francisco Castro & Javier J. P√Ârez & Marta Rodr√Çguez-Vives, 2013. "Fiscal Data Revisions in Europe," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1187-1209, September.
    14. Roel Beetsma & Massimo Giuliodori & Peter Wierts, 2009. "Planning to cheat: EU fiscal policy in real time [‘What do we really know about fiscal sustainability in the EU?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(60), pages 753-804.
    15. Roberto Golinelli & Sandro Momigliano, 2009. "The Cyclical Reaction of Fiscal Policies in the Euro Area: The Role of Modelling Choices and Data Vintages," Fiscal Studies, Institute for Fiscal Studies, vol. 30(1), pages 39-72, March.
    16. Mr. Anthony M Annett, 2006. "Enforcement and the Stability and Growth Pact: How Fiscal Policy Did and Did Not Change Under Europe’s Fiscal Framework," IMF Working Papers 2006/116, International Monetary Fund.
    17. Roel Beetsma & Massimo Giuliodori, 2010. "Fiscal adjustment to cyclical developments in the OECD: an empirical analysis based on real-time data," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 419-441, July.
    18. Schuknecht, Ludger & Morris, Richard & Ongena, Hedwig, 2006. "The reform and implementation of the Stability and Growth Pact," Occasional Paper Series 47, European Central Bank.
    19. Jürgen Hagen, 2010. "Sticking to fiscal plans: the role of institutions," Public Choice, Springer, vol. 144(3), pages 487-503, September.
    20. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeffrey A. Frankel & Jesse Schreger, 2016. "Bias in Official Fiscal Forecasts: Can Private Forecasts Help?," NBER Working Papers 22349, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacopo Cimadomo, 2016. "Real-Time Data And Fiscal Policy Analysis: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 30(2), pages 302-326, April.
    2. Joseph David Barroso Vasconcelos de Deus & Helder Ferreira de Mendonça, 2015. "Empirical evidence on fiscal forecasting in Eurozone countries," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(5), pages 838-860, October.
    3. 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).
    4. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    5. 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.
    6. Patricia Martins & Leonida Correia, 2013. "The determinants of macroeconomic forecasts and the Stability and Growth Pact," Working Papers Department of Economics 2013/07, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    7. Julia del Amo Valor & Marcos Martín Mateos & Diego Martínez López & Javier J. Pérez, 2023. "Is the European economic governance framework too “complex”? A critical discussion," Working Papers 2023-06, FEDEA.
    8. Beetsma, Roel & Giuliodori, Massimo & Walschot, Mark & Wierts, Peter, 2013. "Fifty years of fiscal planning and implementation in the Netherlands," European Journal of Political Economy, Elsevier, vol. 31(C), pages 119-138.
    9. Picchio, Matteo & Santolini, Raffaella, 2020. "Fiscal rules and budget forecast errors of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 64(C).
    10. Beetsma, Roel & Giuliodori, Massimo & Wierts, Peter & Bluhm, Benjamin, 2011. "From First-Release to Ex-Post Fiscal Data: Exploring the Sources of Revision Errors in the EU," CEPR Discussion Papers 8413, C.E.P.R. Discussion Papers.
    11. Thiess Buettner & Bjoern Kauder, 2015. "Political biases despite external expert participation? An empirical analysis of tax revenue forecasts in Germany," Public Choice, Springer, vol. 164(3), pages 287-307, September.
    12. 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.
    13. Niels D. Gilbert & Jasper F.M. Jong, 2017. "Do European fiscal rules induce a bias in fiscal forecasts? Evidence from the Stability and Growth Pact," Public Choice, Springer, vol. 170(1), pages 1-32, January.
    14. Beate Jochimsen & Robert Lehmann, 2017. "On the political economy of national tax revenue forecasts: evidence from OECD countries," Public Choice, Springer, vol. 170(3), pages 211-230, March.
    15. Carabotta, Laura & Paluzie, Elisenda & Ramos, Raul, 2017. "Does fiscal responsibility matter? Evidence from public and private forecasters in Italy," International Journal of Forecasting, Elsevier, vol. 33(3), pages 694-706.
    16. Björn Kauder & Niklas Potrafke & Christoph Schinke, 2017. "Manipulating Fiscal Forecasts: Evidence from the German States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 73(2), pages 213-236, June.
    17. Jacopo Cimadomo, 2012. "Fiscal Policy in Real Time," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 440-465, June.
    18. Beetsma, Roel & Giuliodori, Massimo & Wierts, Peter, 2009. "Budgeting versus implementing fiscal policy in the EU," CEPR Discussion Papers 7285, C.E.P.R. Discussion Papers.
    19. Niels Gilbert & Jasper de Jong, 2014. "Does the Stability and Growth Pact induce a bias in the EC's fiscal forecasts," DNB Working Papers 451, Netherlands Central Bank, Research Department.
    20. Luisa Giuriato & Alessandra Cepparulo & Matteo Barberi, 2016. "Fiscal forecasts and political systems: a legislative budgeting perspective," Public Choice, Springer, vol. 168(1), pages 1-22, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:compes:v:58:y:2016:i:2:p:226-253. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.