Bias in Official Fiscal Forecasts: Can Private Forecasts Help?

Bias in Official Fiscal Forecasts: Can Private Forecasts Help? Jeffrey Frankel, June 18, 2013, Paper. "Government forecasts of GDP growth and budget balances are generally more overoptimistic than private sector forecasts, in a sample of 31 countries. When official forecasts that are especially optimistic relative to private forecasts ex ante, they are more likely to be over-optimistic relative to realizations ex post. Euro area governments made during the period 1999-2007 assiduously and inaccurately avoided forecasting deficit levels that would exceed the 3% Stability and Growth Pact threshold; private sector forecasters were not subject to this crude bias. Three important implications."