Real-Time Forecasts of State and Local Government Budgets with an Application to COVID-19

77 Pages Posted: 21 Apr 2020 Last revised: 15 May 2020

See all articles by Eric Ghysels

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Fotis Grigoris

Indiana University - Kelley School of Business - Department of Finance

Nazire Ozkan

Amazon Web Services, Inc.

Date Written: May 11, 2020

Abstract

Using a sample of the 48 contiguous United States, we consider the problem of forecasting state and local governments' revenues and expenditures in real time using models that feature mixed-frequency data. We find that single-equation mixed data sampling (MIDAS) regressions that predict low-frequency fiscal outcomes using high-frequency economic data historically outperform both traditional fiscal forecasting models and theoretically motivated multi-equation models. We also consider an application of forecasting fiscal outcomes in the face of the economic uncertainty induced by the 2019-2020 coronavirus pandemic. Overall, we show that MIDAS regressions provide a simple tool for predicting fiscal outcomes in real time.

Keywords: Fiscal Policy, Forecasting, Mixed-Frequency Bayesian VAR, MIDAS Regressions

JEL Classification: C22, C32, C50, C53, E62

Suggested Citation

Ghysels, Eric and Grigoris, Fotis and Ozkan, Nazire, Real-Time Forecasts of State and Local Government Budgets with an Application to COVID-19 (May 11, 2020). Available at SSRN: https://ssrn.com/abstract=3580363 or http://dx.doi.org/10.2139/ssrn.3580363

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

Fotis Grigoris

Indiana University - Kelley School of Business - Department of Finance

1309 E. 10th St.
Bloomington, IN 47405
United States

Nazire Ozkan

Amazon Web Services, Inc. ( email )

United States

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

Paper statistics

Downloads
183
Abstract Views
1,884
rank
204,321
PlumX Metrics