Credible fiscal plans that aim at restoring fiscal sustainability will be
essential to counter the present increase in debt levels all across Europe. The
macroeconomic scenario of such plans will be crucial. This paper assesses
whether there is any advantage in delegating (part of) such power to
supra-national forecasts. The evidence on the relative performance of the
European Commission’s (EC) growth forecast is rather mixed, with considerable
variation at the country level. Some national government forecasts (France,
Italy, and Portugal) perform worse in terms of descriptive statistics than the
EC forecast for all forecast horizons. For the year ahead the EC growth forecast
is better than the official forecasts for almost ¾ of the EU-15 countries. All
in all, since the EC forecast appears to be a good benchmark, in order to reduce
the (optimistic) forecast bias, national governments could be forced to justify
any large (optimistic) deviation from this benchmark when presenting their
respective national stability and growth programmes.
JEL Classification: H68, E17, E61, E62, H6.
Sustainability of public debt, Fiscal policy, Stability and Growth Pact, Fiscal
forecasting, forecast evaluation, real-time data.