Fiscal Targets. A Guide to Forecasters?

35 Pages Posted: 27 Apr 2015

See all articles by Joan Paredes

Joan Paredes

European Central Bank

Javier J. Pérez

Banco de España - Research Department

Gabriel Pérez-Quirós

Banco de España

Multiple version iconThere are 3 versions of this paper

Date Written: April 2015


Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as published/announced by the government; (ii) incoming, observed data on the actual degree of implementation of ongoing plans. We formulate and estimate empirical models for a number of EU countries (Germany, France, Italy, and Spain) to show that government (consumption) targets convey useful information about ex-post policy developments when policy changes significantly (even if past credibility is low) and when there is limited information about the implementation of plans (e.g. at the beginning of a fiscal year). In addition, our models are instrumental to unveil the current course of policy in real-time. Our approach complements a well-established branch of the literature that finds politically-motivated biases in policy targets.

Keywords: fiscal policy, forecasting, policy credibility

JEL Classification: C54, E61, E62, H30, H68

Suggested Citation

Paredes, Joan and Perez, Javier J. and Pérez-Quirós, Gabriel, Fiscal Targets. A Guide to Forecasters? (April 2015). CEPR Discussion Paper No. DP10553, Available at SSRN:

Joan Paredes (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid


Gabriel Pérez-Quirós

Banco de España

Alcala 50
Madrid 28014

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics