Fiscal Targets. A Guide to Forecasters?

• DOI: 10.2139/ssrn.2584877
• Publication Date: 2015-04-01T17:35:33Z
• Authors: Joan Paredes; Javier J. Perez; Gabriel Perez-Quiros
• Keywords: learning; jel:E61; ddc:330; jel:E62; H68; 05 social sciences; jel:H30; forecasting; jel:C54; jel:H68; fiscal policy; forecasting; policy credibility; E61; fiscal policy, forecasting, learning, policy credibility; 0502 economics and business; H30; policy credibility, fiscal policy, forecasting; E62; policy credibility; C54; fiscal policy

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 anticipate future course fiscal real-time: (i) ex-ante path as published/announced by government; (ii) incoming, observed data on actual degree implementation ongoing plans. We formulate and estimate empirical models for number EU countries (Germany, France, Italy Spain) show that (consumption) targets convey useful about ex-post developments when changes significantly (even if past credibility is low) there limited plans (e.g. at beginning year). In addition, our are instrumental unveiling current real time. Our approach complements well-established branch literature finds politically motivated biases targets.