DOI
10.1016/j.ijforecast.2019.02.009
Abstract
We examine a new set of U.S. fiscal forecasts from FOMC briefing books. The forecasts were precisely those presented to monetary policymakers and include frequently updated estimates covering six complete business cycles and several fiscal-policy regimes. We detail the performance of forecast federal expenditures, revenues, surpluses, and structural surpluses in terms of accuracy, bias, and efficiency. We find that forecast errors can be economically large, even at relatively short forecast horizons. While economic activity became less volatile after 1990, fiscal policy became harder to forecast. Finally, cyclically adjusted deficit forecasts appear to be overoptimistic around both business cycle peaks and troughs, suggesting that fiscal policy is counter-cyclical in downturns and pro-cyclical in the early stages of recoveries.
Document Type
Post-print Article
Publication Date
2019
Publisher Statement
Copyright © 2019 Elsevier. Article first published online: May 2019.
DOI: 10.1016/j.ijforecast.2019.02.009.
The definitive version is available at: https://www-sciencedirect-com.newman.richmond.edu/science/article/pii/S0169207019300809?via%3Dihub.
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Full Citation:
Croushore, Dean and Simon van Norden. "Fiscal Surprises at the FOMC." International Journal of Forecasting 35, no. 4 (2019): 1583-1595.
https://doi.org/10.1016/j.ijforecast.2019.02.009.
Recommended Citation
Croushore, Dean and Simon van Norden. "Fiscal Surprises at the FOMC." International Journal of Forecasting 35, no. 4 (2019): 1583-1595. https://doi.org/10.1016/j.ijforecast.2019.02.009.
Recommended Citation
Croushore, Dean and Simon van Norden. "Fiscal Surprises at the FOMC." International Journal of Forecasting 35, no. 4 (2019): 1583-1595. https://doi.org/10.1016/j.ijforecast.2019.02.009.