From Budgetary Forecasts to Ex Post Fiscal Data: Exploring the Evolution of Fiscal Forecast Errors in the European Union

19 Pages Posted: 24 Aug 2013

See all articles by Roel M. W. J. Beetsma

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); European Commission; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute; Netspar

Benjamin Bluhm

affiliation not provided to SSRN

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE); Tinbergen Institute

Peter Wierts

De Nederlandsche Bank; VU University Amsterdam

Date Written: October 2013

Abstract

This paper splits the ex post error in the budget balance, defined as the final budget figure minus the planned figure, into implementation and revision errors, and investigates the determinants of these errors. The implementation error is the difference between the nowcast, published toward the end of the year of budget implementation, and the planned budget, while the revision error is the difference between the final figure and the nowcast. The split takes account of differences in reporting incentives at the different budgeting stages. The predictive content of fiscal plans is important, because it determines the reliability of the budget, while that of the nowcasts is important also because these figures are an input for the next budget and may contain important signals about the fiscal stance. Implementation and revision errors may arise for political and strategic reasons. Our results suggest that an improvement in the quality of institutions, whether measured by the tightness of national fiscal rules, the mediumÔÇÉterm budgetary framework or budgetary transparency, increases the quality of budgetary reporting at both the planning and the nowcast stage. This supports the recently adopted requirements on national fiscal frameworks. It also strengthens the case for a close monitoring by the European Commission of national budgeting.

JEL Classification: E6, H6

Suggested Citation

Beetsma, Roel M. W. J. and Bluhm, Benjamin and Giuliodori, Massimo and Wierts, Peter, From Budgetary Forecasts to Ex Post Fiscal Data: Exploring the Evolution of Fiscal Forecast Errors in the European Union (October 2013). Contemporary Economic Policy, Vol. 31, Issue 4, pp. 795-813, 2013, Available at SSRN: https://ssrn.com/abstract=2315424 or http://dx.doi.org/10.1111/j.1465-7287.2012.00337.x

Roel M. W. J. Beetsma (Contact Author)

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

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European Commission ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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Tinbergen Institute ( email )

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Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Benjamin Bluhm

affiliation not provided to SSRN

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Peter Wierts

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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