Citation

Discussion Paper Details

Please find the details for DP10553 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Fiscal targets. A guide to forecasters?

Author(s): Joan Paredes-Lodeiro, Javier J Pérez and Gabriel Pérez-Quirós

Publication Date: April 2015

Keyword(s): fiscal policy, forecasting and policy credibility

Programme Area(s): International Macroeconomics

Abstract: Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as published/announced by the government; (ii) incoming, observed data on the actual degree of implementation of ongoing plans. We formulate and estimate empirical models for a number of EU countries (Germany, France, Italy, and Spain) to show that government (consumption) targets convey useful information about ex-post policy developments when policy changes significantly (even if past credibility is low) and when there is limited information about the implementation of plans (e.g. at the beginning of a fiscal year). In addition, our models are instrumental to unveil the current course of policy in real-time. Our approach complements a well-established branch of the literature that finds politically-motivated biases in policy targets.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10553

Bibliographic Reference

Paredes-Lodeiro, J, Pérez, J and Pérez-Quirós, G. 2015. 'Fiscal targets. A guide to forecasters?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10553