Monitoring and Forecasting Annual Public Deficit. The Case of France

29 Pages Posted: 9 Sep 2005

See all articles by Andrea Silvestrini

Andrea Silvestrini

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Laurent Moulin

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Matteo Salto

Directorate-General COMP, European Commission

David Veredas

Vlerick Business School

Date Written: July 2005

Abstract

This paper presents and evaluates a new approach, temporal aggregation of models, to forecast annual budget deficits using montly information. Using French monthly data on central government revenues and expenditures, the method we propose consists of: 1) estimating monthly ARIMA models for all items of central government revenues and expenditures; 2)inferring the annual ARIMA models from the monthly models; 3) using the inferred annual ARIMA models to perform one-step-ahead forecasts for each item; 4) compounding the annual forecasts of all revenues and expenditures to obtain an annual budget deficit forecast. The major empirical benefit of this technique is that as soon as new monthly data becomes available, annual deficit forecasts are updated. This allows us to detect in advance possible slippages in central government finances. For years 2002, 2003 and 2004, forecasts obtained following the proposed approach are compared with a benchmark method and with official predictions published by the French government. An evaluation of their relative performance is provided.

Keywords: French State deficit, temporal aggregation, intra-annual, forecasting

JEL Classification: C22, C53, E62, H60

Suggested Citation

Silvestrini, Andrea and Moulin, Laurent and Salto, Matteo and Veredas, David, Monitoring and Forecasting Annual Public Deficit. The Case of France (July 2005). Available at SSRN: https://ssrn.com/abstract=795327 or http://dx.doi.org/10.2139/ssrn.795327

Andrea Silvestrini

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Laurent Moulin

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

Matteo Salto

Directorate-General COMP, European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

David Veredas (Contact Author)

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

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