DP1836 Fiscal Solvency and Fiscal Forecasting in Europe

Author(s): Michael J Artis, Massimiliano Marcellino
Publication Date: March 1998
Keyword(s): Deficits, Fiscal Policy, Forecast Accuracy, Maasticht treaty, Solvency, stability and growth pact
JEL(s): C22, D99, E62, H63
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1836

This paper analyses two features of concern to policy-makers in the countries of the prospective European Monetary Union: the solvency of their government?s finances; and the accuracy of fiscal forecasts. Extending the existing methodology of solvency tests, the paper finds that, with few exceptions, EU governments are insolvent, albeit debt/GDP ratios show signs of stabilizing. The accuracy of official short-term fiscal forecasts (those of the OECD) is analysed, using conventional techniques, and found to be reassuring.