Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Bias in Official Fiscal Forecasts: Can Private Forecasts Help?
    25 Jul 2016Working Paper Summaries

    Bias in Official Fiscal Forecasts: Can Private Forecasts Help?

    by Jeffrey A. Frankel and Jesse Schreger
    Why do countries find it so hard to get their deficits under control? The authors bring together data on private sector forecasts with official government forecasts of 26 countries, and identify systematic patterns in errors that official budget agencies make in their forecasts—particularly over-optimistic forecasts of GDP growth and budget balances. Incorporating private sector forecasts into the budget process could reduce violations of limits set by fiscal rules by identifying errors ahead of time rather than just afterwards.
    LinkedIn
    Email

    Author Abstract

    Government forecasts of GDP growth and budget balances are generally more over optimistic than private sector forecasts. When official forecasts are especially optimistic relative to private forecasts ex ante, they are more likely also to be over optimistic relative to realizations ex post. For example, euro area governments during the period 1999–2007 assiduously and inaccurately avoided forecasting deficit levels that would exceed the 3% Stability and Growth Pact threshold; meanwhile, private sector forecasters were not subject to this crude bias. As a result, using private sector forecasts as an input into the government budgeting-making process would probably reduce official forecast errors for budget deficits.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: June 2016
    • HBS Working Paper Number: NBER Working Paper Series, No. 22349
    • Faculty Unit(s): Business, Government and International Economy
      Trending
        • 13 Dec 2021
        • Research & Ideas

        The Unlikely Upside of Mergers: More Diverse Management Teams

        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 16 Mar 2023
        • Research & Ideas

        Why Business Travel Still Matters in a Zoom World

        • 14 Dec 2021
        • Op-Ed

        To Change Your Company's Culture, Don't Start by Trying to Change the Culture

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

    Find Related Articles
    • Forecasting and Prediction

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College