Fiscal Surprises at the FOMC

57 Pages Posted: 21 Jun 2017

See all articles by Dean Croushore

Dean Croushore

University of Richmond - E. Claiborne Robins School of Business

Simon van Norden

HEC Montreal - Department of Finance; CIRANO; University of Montreal - Center for Interuniversity Research in Econometrics

Date Written: 2017-06-20


This paper provides a detailed examination of a new set of fiscal forecasts for the U.S. assembled by Croushore and van Norden (2017) from FOMC briefing books. The data are of particular interest because (1) they afford a look at fiscal forecasts over six complete business cycles and several fiscal policy regimes, covering both peacetime and several wars, (2) the forecasts were precisely those presented to monetary policymakers, (3) they include frequently updated estimates of both actual and cyclically adjusted deficits, (4) unlike most other U.S. fiscal forecasts, they were neither partisan nor constrained by unrealistic assumptions about future fiscal policy, and (5) forecasts for other variables (GDP growth, inflation) from the same forecasters are known to compare favorably with most other available forecasts. We detail the performance of forecast federal expenditures, revenues, surpluses, and structural surpluses in terms of accuracy, bias, and efficiency. We find that (1) fiscal forecast errors can be economically large, even at relatively short forecast horizons, (2) while the accuracy of unemployment rate forecast errors improved after 1990, that of most fiscal variables deteriorated considerably, (3) there is limited evidence of forecast bias, and most of this evidence is confined to the period before 1993, (4) the forecasts appear to be efficient with respect to both the fed funds rate and CBO projections, and (5) cyclically adjusted deficit forecasts appear to be over-optimistic around both business cycle peaks and troughs.

Keywords: fiscal policy, deficits, forecasting, FOMC, Greenbook

JEL Classification: E62, H68

Suggested Citation

Croushore, Dean and van Norden, Simon, Fiscal Surprises at the FOMC (2017-06-20). FRB of Philadelphia Working Paper No. 17-13, Available at SSRN:

Dean Croushore (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

1 Gateway Road
University of Richmond, VA 23173
United States
804-287-1961 (Phone)


Simon Van Norden

HEC Montreal - Department of Finance ( email )

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Montreal, Quebec H3T 2A7
514-340-6781 (Phone)
514-340-5632 (Fax)


CIRANO ( email )

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Montreal H3C 3J7, Quebec


University of Montreal - Center for Interuniversity Research in Econometrics ( email )

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Montreal, Quebec H3C 3J7

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