TY - JOUR
T1 - Directional analysis of fiscal sustainability
T2 - Revisiting Domar's debt sustainability condition
AU - Tsuchiya, Yoichi
N1 - Publisher Copyright:
© 2015 Elsevier Inc.
Copyright:
Copyright 2016 Elsevier B.V., All rights reserved.
PY - 2016/1/1
Y1 - 2016/1/1
N2 - This study evaluates directional accuracy of long-term interest rate and nominal GDP growth forecasts made by the U.S. Congressional Budget Office (CBO), the Office of Management and Budget (OMB), and private forecasters by applying a recently developed market-timing test. This study also investigates whether these forecasts provide useful indicators of the well-known Domar's fiscal sustainability condition and whether directional accuracy differs between ruling parties and the state of the economy. This study finds that the CBO forecast for Domar's condition is useful with a two-year horizon, whereas OMB and private forecasts are only useful with a one-year horizon. The directional accuracy of the forecasts does not differ between expansion and recession.
AB - This study evaluates directional accuracy of long-term interest rate and nominal GDP growth forecasts made by the U.S. Congressional Budget Office (CBO), the Office of Management and Budget (OMB), and private forecasters by applying a recently developed market-timing test. This study also investigates whether these forecasts provide useful indicators of the well-known Domar's fiscal sustainability condition and whether directional accuracy differs between ruling parties and the state of the economy. This study finds that the CBO forecast for Domar's condition is useful with a two-year horizon, whereas OMB and private forecasts are only useful with a one-year horizon. The directional accuracy of the forecasts does not differ between expansion and recession.
KW - Debt sustainability
KW - Forecast evaluation
KW - Government forecasts
KW - Market-timing test
KW - Nonparametric methods
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U2 - 10.1016/j.iref.2015.08.012
DO - 10.1016/j.iref.2015.08.012
M3 - Article
AN - SCOPUS:84958640179
VL - 41
SP - 189
EP - 201
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
SN - 1059-0560
ER -