The Political Economy of Revenue-Forecasting Experience From Low-Income Countries
IMF Working Papers, January 1, 2005
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- The Political Economy of Revenue-Forecasting Experience From Low-Income Countries
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Bibliographic details
- Authors: Stephan Danninger, Annette J Kyobe, M. Cangiano
- Published: January 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451860214.001
Key research question and approach
- Analyzes interference and timeliness in the revenue-forecasting process using new data on revenue-forecasting practices in low-income countries.
- Defines "interference" as the occurrence of a significant deviation from purely technical forecasts.
- Develops a theoretical model that explains forecasting interference through government corruption.
- Empirically tests the model and assesses robustness to alternative explanations.
Main findings
- The data broadly supports the theoretical model linking forecasting interference to government corruption.
- Results are robust to alternative explanations.
- Constructed three indices to characterize revenue-forecasting practices:
- Transparency index
- Formality index
- Organizational simplicity index
- Effects of the indices on producing an upfront (timely) budget envelope:
- More transparent forecasting processes lead to early budget constraints.
- More simple (organizationally simple) forecasting processes lead to early budget constraints.
- Formality has no measurable effect on producing an upfront budget envelope.
Policy-relevant implications
- Increasing transparency in the revenue-forecasting process can reduce interference and help secure timely budget envelopes.
- Simplifying organizational arrangements for forecasting can also advance timeliness and reduce scope for interference.
- Emphasis on procedural formality alone is unlikely to improve timeliness or reduce interference.
Subject areas and keywords (as listed)
- Subject: Budget planning and preparation, Corruption, Crime, Expenditure, Public financial management (PFM), Revenue administration, Revenue forecasting, Tax policy
- Keywords: absolute value, Budget planning and preparation, budget submission, corruption, country corruption, estimation practice, expenditure plan, expenditure pressure, expenditure pressure motive, forecasting bias, forecasting Interference, forecasting process, government efficiency, low-income country, revenue forecast, revenue forecasting, revenue-Forecasting practice, state capture, state forecaster, Sub-Saharan Africa, Western Hemisphere, WP