Manipulating Fiscal Forecasts: Evidence from the German States

31 Pages Posted: 21 Feb 2017

See all articles by Bjoern Kauder

Bjoern Kauder

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Niklas Potrafke

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Christoph Schinke

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: February 7, 2017

Abstract

We examine whether German state governments manipulated fiscal forecasts before elections. Our data set includes three fiscal measures over the period 1980-2014. The results do not show that electoral motives influenced fiscal forecasts in West German states. By contrast, East German state governments underestimated spending in pre-election years (compared to other years) by about 0.20 percent of GDP, tax revenues by about 0.36 percent of GDP, and net lending by 0.30 percent of GDP. Predicting low levels of spending and tax revenues, East German state governments thus underestimated the size of government in pre-election years.

Keywords: Fiscal Forecasts, Electoral Cycles, East and West Germany

JEL Classification: H680, E320, E620

Suggested Citation

Kauder, Bjoern and Potrafke, Niklas and Schinke, Christoph, Manipulating Fiscal Forecasts: Evidence from the German States (February 7, 2017). CESifo Working Paper Series No. 6310, Available at SSRN: https://ssrn.com/abstract=2920679

Bjoern Kauder

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Niklas Potrafke (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Christoph Schinke

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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