Fiscal Data Revisions in Europe

Castro, Francisco de; Pérez, Javier J.; Vives, Marta Rodríguez

doi:10.2139/ssrn.1816325

Cited by 29 publications

(32 citation statements)

References 45 publications

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“…1) preliminary data releases are biased and non-efficient predictors of the true values, especially for GDP and public deficit, and several corrections occur over the subsequent vintages (Castro, Pérez and Vives, 2011;Moulin and Wierts, 2006;Merola and Pérez, 2012;Martins and Mora, 2007;Frankel, 2011;Jonung and Larch, 2006);…”

Section: Literature On Forecast Errorsmentioning

confidence: 99%

“…2) the economic cycle is not fully included in the GDP forecast, making GDP forecast errors an important cause of budget deficit errors (Merola and Pérez, 2012;Frankel, 2011;Jonung and Larch, 2006;Moulin and Wierts, 2006;Castro, Pérez and Vives, 2011); 3) being subject to a fiscal rule, without having strong and independent supervision, leads to an increase in GDP and budget deficit errors, possibly due to creative accounting (von Hagen and Wolff, 2006;Frankel, 2011). Bernoth and Wolff (2008), and von Hagen and Wolff (2006) mention that most European Union's members incur in stock flow adjustments (i.e., the change in their government debt is higher than the budget deficit), which increases the yields demanded by financial markets.…”

Section: Literature On Forecast Errorsmentioning

confidence: 99%

“…This increase is higher when the events of creative accounting are reported in the media. On the other hand, Castro, Pérez and Vives (2011) argue that modifications in Eurostat budget rules also explain a significant part of forecast errors, and forecasts may be considered rational after two years (i.e., forecast for year t may be considered correct in year t+2). This conclusion was the reason for the use in our study of forecast's corrections till two years ago as regressors.…”

Section: Literature On Forecast Errorsmentioning

confidence: 99%

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Economic forecasts and sovereign yields

Afonso

Nunes

2015

Economic Modelling

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We assess whether the corrections made to the EC macro and fiscal forecasts (GDP growth rate, inflation, budget balance, debt ratio, current account) have an impact in sovereign yields. We a panel analysis of 15 EU countries (Austria, Belgium, Germany, Denmark, Spain, Finland, France, United Kingdom, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Sweden), for the period from 1999:1 until 2012:1, and we also analyse each country individually, on the basis of a SUR estimation. We find that corrections in the EC's forecasts impinge on 10-year sovereign bond yields, particularly corrections in fiscal variables, being more pronounced in countries with less favourable economic conditions. The penalization for the yields is higher in corrections for the current and next years than for previous years.

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Section: Literature On Forecast Errorsmentioning

confidence: 99%

Section: Literature On Forecast Errorsmentioning

confidence: 99%

Section: Literature On Forecast Errorsmentioning

confidence: 99%

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Economic forecasts and sovereign yields

Afonso

Nunes

2015

Economic Modelling

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“…The first group includes papers analyzing deviations of ex-post outcomes from estimates of fiscal variables. An example of a study in this category is the work of de Castro et al (2011), who focus on 15 EU countries covering the period 1995-2008. Their results indicate that revisions of deficit data are frequent.…”

Section: Introductionmentioning

confidence: 99%

Using Real-Time Data to Test for Political Budget Cycles

2012

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We use real-time annual data on the fiscal balance, government current spending, current revenues and net capital outlays as published at a half yearly frequency in the OECD Economic Outlook for 25 OECD countries. For each fiscal year t we have a number of forecasts, a first release, and subsequent revisions.It turns out that revisions in the fiscal balance data are not affected by elections. However, we do find that governments spend more than reported before an election which provides support for moralhazard type of political budget cycle (PBC) models: through hidden efforts the incumbent tries to enhance his perceived competence. We also find that governments had higher current receipts than reported before an election, which is in line with adverse-selection type of PBC models in which incumbents signal competence through expansionary fiscal policy before the elections.JEL Classification: D72; E62; H6; H83; P16.

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“…Governments may similarly use favourable rule interpretations in order to maintain an attractive balance sheet for foreign sovereign bond investors, thus allowing them to fund spending that voters want. In more recent work that comes closest to our approach, De Castro, Pérez and Rodríguez-Vives (2013) find that most European Union member states are more likely to understate their deficits, that this behavior is more common in pre-electoral periods, and less common with more stringent fiscal rules in place. We expand this research in several important ways.…”

Section: How Do These Incentives Shape What Debt Numbers Are Reportedmentioning

confidence: 85%

Interpreting fiscal accounting rules in the European Union

Gandrud

Hallerberg

2017

Journal of European Public Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In the European Union, the creation of public debt statistics starts with member state governments' reports. The EU's statistical agency-Eurostat-then revises. How do these actors' incentives shape reported numbers? Governments have incentives to take a more favourable view of often ambiguous accounting rules than Eurostat. Lower debt improves governments' performance with domestic and external audiences. Eurostat is tasked with monitoring budgets for 'excessive' debts. We expect governments to present debt figures that Eurostat then revises upwards. This is more likely when governments have high debts, especially when in the eurozone, and prior to elections. Financial crises heighten the number of policies needing interpretation and both actors have more incentives to shape the numbers. We examine these propositions using Eurostat's debt revisions. We find debts are revised upwards more for eurozone countries with higher debt levels and years with unscheduled elections. Financial stress strengthens these effects. Terms of use: Documents inJEL-Codes: F340.

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Fiscal Data Revisions in Europe

Abstract: 4Non-technical summary 5

Cited by 29 publications

References 45 publications

Economic forecasts and sovereign yields

Economic forecasts and sovereign yields

Using Real-Time Data to Test for Political Budget Cycles

Interpreting fiscal accounting rules in the European Union

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