Working Paper: CEPR ID: DP2206
Authors: Michael J. Artis; Massimiliano Marcellino
Abstract: We analyse the relative performance of the IMF, OECD and EC in forecasting the government deficit, as a ratio to DGP, for the G7 countries. Interesting differences across countries emerge, sometimes supporting the hypothesis of an asymmetric loss function (i.e., of a preference for underprediction or overprediction), and potential benefits from forecast pooling.
Keywords: Fiscal forecasting; Forecast encompassing
JEL Codes: C53; E17; H62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| optimistic growth forecasts (E66) | overestimated deficits (H68) |
| output growth forecast errors (E37) | deficit forecast accuracy (H68) |
| optimistic growth forecasts (E66) | higher tax revenues (H29) |
| higher tax revenues (H29) | reduced realized deficit relative to the forecast (H68) |
| much of the error in deficit forecasts (H68) | output growth forecast errors (E37) |