Revenue Forecast Errors in the European Union

Department of Economics, ISEG-UL, Working Paper nº 02/2014/DE/UECE

34 Pages Posted: 5 Feb 2014

See all articles by Antonio Afonso

Antonio Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Rui Carvalho

Technical University of Lisbon (UTL) - School of Economics and Management

Date Written: November 22, 2013

Abstract

In this paper we assess the determinants of revenue forecast errors for the EU-15 between 1999 and 2012, based on the forecasts published bi-annually by the European Commission. Our results show that personal income rate changes increase the revenue forecast errors: for forecasts made in t for t, increases in the corporate tax rate implies a decrease in the revenue forecast errors, in t 1 and t 2. Moreover, an increase in GDP forecast errors decreases revenue errors, whereas an increase in the inflation error will increase revenue errors. GDP errors, minority governments, election year and corporate tax rate changes can be associated with optimistic revenue forecasts. On the other hand, yield, inflation errors and VAT tax rate changes are associated with more prudent forecast behaviour.

Keywords: macro forecasts, revenue forecast errors, EU

JEL Classification: C23, H20, H68

Suggested Citation

Afonso, Antonio and Carvalho, Rui, Revenue Forecast Errors in the European Union (November 22, 2013). Department of Economics, ISEG-UL, Working Paper nº 02/2014/DE/UECE, Available at SSRN: https://ssrn.com/abstract=2358610 or http://dx.doi.org/10.2139/ssrn.2358610

Antonio Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

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HOME PAGE: http://https://www.iseg.ulisboa.pt/aquila/homepage/aafonso

UECE (Research Unit on Complexity and Economics)

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Lisbon, 1249-078
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HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Rui Carvalho

Technical University of Lisbon (UTL) - School of Economics and Management ( email )

Rua Miguel Lupi, 20
Lisbon
Portugal

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