Abstract

http://ssrn.com/abstract=2169344
 


 



Real-Time Predictions of the U.S. Federal Government Budget: Expenditures, Revenues and Deficits


Eric Ghysels


University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Nazire Ozkan


University of North Carolina (UNC) at Chapel Hill - Department of Economics

October 31, 2012

UNC Kenan-Flagler Research Paper

Abstract:     
This paper proposes a forecasting procedure involving a combination of MIDAS-type regression models, allowing one to use high frequency predictors with different sampling frequencies to predict the U.S. Federal Government Expenditures (Net Outlays), Revenues and Deficits all of which are low frequency (quarterly/annual) variables. Evidence shows that forecast combinations of MIDAS regression models provide forecast gains over the traditional models. It is also shown that one-step ahead real-time predictions from MIDAS regressions of annual expenditures and revenues have smaller forecast errors than one-step ahead projections provided by the Congressional Budget Office (CBO) for the fiscal years of 1998-2010. Moreover, MIDAS regressions with leads employed to have real-time forecast updates of the current quarter (nowcasting) federal expenditures and revenues are found to have improved forecast performance compared to MIDAS regressions without leads.

Number of Pages in PDF File: 27

Keywords: C22

JEL Classification: Budget predictions, MIDAS regressions

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Date posted: November 1, 2012  

Suggested Citation

Ghysels, Eric and Ozkan, Nazire, Real-Time Predictions of the U.S. Federal Government Budget: Expenditures, Revenues and Deficits (October 31, 2012). UNC Kenan-Flagler Research Paper. Available at SSRN: http://ssrn.com/abstract=2169344 or http://dx.doi.org/10.2139/ssrn.2169344

Contact Information

Eric Ghysels (Contact Author)
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)
HOME PAGE: http://www.unc.edu/~eghysels/
Nazire Ozkan
University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Chapel Hill, NC 27599
United States
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