Improving Fiscal Policy in the EU: The Case for Independent Forecasts

43 Pages Posted: 11 Jul 2006

See all articles by Lars Jonung

Lars Jonung

Lund University - Dept. of Economics

Martin Larch

European Fiscal Board

Abstract

We point out that official forecasts of output dynamics are crucial to the assessment of cyclically adjusted budget balances, and provide evidence that in some euro-area countries biased forecasts have played a thus far neglected role in generating excessive deficits. We suggest that the forecast bias may be politically motivated, and that forecasts produced by an independent authority would be better than in-house Ministry of Finance forecasts for the purpose of monitoring budget formation and budget outcomes.

Suggested Citation

Jonung, Lars and Larch, Martin, Improving Fiscal Policy in the EU: The Case for Independent Forecasts. Economic Policy, Vol. 21, No. 47, pp. 491-534, July 2006, Available at SSRN: https://ssrn.com/abstract=916596 or http://dx.doi.org/10.1111/j.1468-0327.2006.00162.x

Lars Jonung (Contact Author)

Lund University - Dept. of Economics ( email )

Box 7080
Lund, 22007
Sweden

Martin Larch

European Fiscal Board ( email )

Belgium
0032 2 2969244 (Phone)

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