Forecasting Exogenous Fiscal Variables in the United States

39 Pages Posted: 13 Jan 2004

See all articles by Darrel S. Cohen

Darrel S. Cohen

Federal Reserve Board - Division of Research and Statistics

Glenn R. Follette

Board of Governors of the Federal Reserve System

Date Written: November 2003

Abstract

This paper provides an introduction to the practice of forecasting exogenous components of federal government taxes and spending-policy actions, for short - in the United States. First, we estimate simple models of defense expenditures that are useful for constructing current-quarter forecasts based on incoming daily and monthly spending data. Also, we discuss forecasting policy changes in the context of extending recent empirical work of Alan Auerbach (2002, 2003) on fiscal reaction functions. Forecasts of exogenous fiscal actions are an important input into forecasts of the budget deficit, and we compare the forecasts of the budget deficit prepared by the Congressional Budget Office (CBO), the President's Office of Management and Budget (OMB), and the staff of the Federal Reserve Board (FRB). To our knowledge, analysis of the FRB forecasts has not been done before.

Suggested Citation

Cohen, Darrel S. and Follette, Glenn R., Forecasting Exogenous Fiscal Variables in the United States (November 2003). Available at SSRN: https://ssrn.com/abstract=484422 or http://dx.doi.org/10.2139/ssrn.484422

Darrel S. Cohen (Contact Author)

Federal Reserve Board - Division of Research and Statistics

Washington, DC 20551
United States
202-452-2376 (Phone)
202-452-3819 (Fax)

Glenn R. Follette

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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