Working Paper: CEPR ID: DP7969
Authors: Roel Beetsma; Massimo Giuliodori; Mark Walschot; Peter Wierts
Abstract: Using real-time data from the annual budget over the period 1958-2009, we explore the planning and realization of fiscal policy in the Netherlands. Our key findings are the following. First, planned surpluses are on average unbiased, although they are overoptimistic during the first half of the sample and too pessimistic during the second half of the sample. The latter is the result of cautious real-time revenue estimates by the Dutch Ministry of Finance during this period. Second, real growth projections by the official Dutch forecasting agency are unbiased. This contrasts with the experience of the EU as a whole where biased growth projections represent an important source of fiscal slippage. Third, general economic conditions and the state of the public finances are important determinants of both fiscal plans and their implementation. Fourth, this is also the case for political and institutional factors. Expenditure overruns are partly related to political factors, whereas cautious revenue forecasts relate to the institutional setting. In particular, the most recent regime of the ?trend-based budget policy? has worked well for fiscal discipline in the Netherlands.
Keywords: Fiscal Implementation; Fiscal Planning; Institutional Factors; Political Factors; Real-time Data
JEL Codes: E6; H6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| planned surpluses (H62) | unbiased average (C51) |
| planned surpluses (H62) | overoptimistic projections (F17) |
| planned surpluses (H62) | too pessimistic projections (E17) |
| overspending relative to plans (H72) | overoptimism in fiscal planning (H68) |
| higher-than-anticipated tax revenues (H27) | pessimism in fiscal planning (H68) |
| real growth projections (O49) | unbiased projections (E17) |
| general economic conditions (E66) | fiscal plans and implementation (O23) |
| political factors (P16) | fiscal planning and implementation (O23) |
| trend-based budget policy (E62) | fiscal discipline in the Netherlands (H60) |