{
  "title": "Authorities’ Fiscal Forecasts in Latin America: Are They Optimistic?",
  "publication": "IMF Working Papers, June 4, 2021",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2021/06/04/authorities-fiscal-forecast-in-latin-america-are-they-optimistic-50223",
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  "summary": "Do governments in Latin America tend to be optimistic when preparing budgetary projections? We address this question by constructing a novel dataset of the authorities’ fiscal forecasts in six Latin American economies using data from annual budget documents over the period 2000-2018.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Metodij Hadzi-Vaskov, Luca A Ricci, Alejandro M. Werner, Rene Zamarripa\n- Date: June 4, 2021\n- Scope: Six Latin American economies using annual budget documents over the period 2000-2018.\n- Research question: Do governments in Latin America tend to be optimistic when preparing budgetary projections?"
    },
    {
      "heading": "Methodology",
      "content": "- Constructed a novel dataset of the authorities’ fiscal forecasts in six Latin American economies using data from annual budget documents over the period 2000-2018.\n- Compared authorities’ forecasts with outturns reported in the corresponding budget documents of the following years to measure fiscal forecast errors and their evolution."
    },
    {
      "heading": "Key Findings",
      "content": "- For most countries, there is no general optimistic bias in the forecasts for the fiscal balance-to-GDP ratio (though there may be bias for the components).\n- Fiscal forecasts have improved for some countries over time, albeit they have worsened for others.\n- Forecast errors for public debt-to-GDP ratios are negatively associated with surprises to GDP growth.\n- Budget balance rules seem to help contain the size of the fiscal forecast errors."
    },
    {
      "heading": "Drivers of Forecast Errors",
      "content": "- Forecast errors for the fiscal balance-to-GDP ratio are:\n  - Positively correlated with GDP growth.\n  - Positively correlated with terms of trade changes.\n  - Negatively correlated with GDP deflator surprises.\n- Forecast errors for public debt-to-GDP ratios are negatively associated with surprises to GDP growth."
    },
    {
      "heading": "Policy Implications and Interpretation",
      "content": "- Presence of budget balance rules is associated with smaller fiscal forecast errors, suggesting fiscal rules can improve forecast accuracy or constrain error magnitude.\n- Heterogeneity across countries indicates that institutional settings and components of forecasts (revenues, expenditures, debt) matter for the presence and direction of bias.\n- Improving forecasting practices could focus on better accounting for GDP growth volatility, terms of trade shifts, and GDP deflator surprises.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2021/06/04/authorities-fiscal-forecast-in-latin-america-are-they-optimistic-50223"
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    "Authors: Metodij Hadzi-Vaskov, Luca A Ricci, Alejandro M. Werner, Rene Zamarripa",
    "Published: June 4, 2021",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513573403.001",
    "Authors: Metodij Hadzi-Vaskov, Luca A Ricci, Alejandro M. Werner, Rene Zamarripa",
    "Date: June 4, 2021",
    "Scope: Six Latin American economies using annual budget documents over the period 2000-2018.",
    "Research question: Do governments in Latin America tend to be optimistic when preparing budgetary projections?",
    "Constructed a novel dataset of the authorities’ fiscal forecasts in six Latin American economies using data from annual budget documents over the period 2000-2018.",
    "Compared authorities’ forecasts with outturns reported in the corresponding budget documents of the following years to measure fiscal forecast errors and their evolution.",
    "For most countries, there is no general optimistic bias in the forecasts for the fiscal balance-to-GDP ratio (though there may be bias for the components).",
    "Fiscal forecasts have improved for some countries over time, albeit they have worsened for others.",
    "Forecast errors for public debt-to-GDP ratios are negatively associated with surprises to GDP growth.",
    "Budget balance rules seem to help contain the size of the fiscal forecast errors.",
    "Forecast errors for the fiscal balance-to-GDP ratio are:",
    "Forecast errors for public debt-to-GDP ratios are negatively associated with surprises to GDP growth.",
    "Presence of budget balance rules is associated with smaller fiscal forecast errors, suggesting fiscal rules can improve forecast accuracy or constrain error magnitude.",
    "Heterogeneity across countries indicates that institutional settings and components of forecasts (revenues, expenditures, debt) matter for the presence and direction of bias.",
    "Improving forecasting practices could focus on better accounting for GDP growth volatility, terms of trade shifts, and GDP deflator surprises.",
    "**Working Paper**"
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