Sources of error in state revenue forecasts or how can the forecast possibly be so far off
Journal of Public Budgeting, Accounting & Financial Management
ISSN: 1096-3367
Article publication date: 1 March 2006
Abstract
State and federal revenues fell well short of projections in 2002. While revenues normally turn down in a recession, those revenue shortfalls were much greater than would have been expected given how mild the 2001 recession turned out to be. This paper examines some of the reasons for the large forecast variances observed in recent years using specific examples from forecasts made for the state of Minnesota. Key factors identified include inaccurate forecast for U.S. economic growth; inadequate, untimely and inaccurate data; imperfect models; and unrecognized changes in the structure of the economy. These factors came together and reinforced each other, ultimately producing a larger reduction in state revenues than could have been anticipated in advance.
Citation
Stinson, T.F. (2006), "Sources of error in state revenue forecasts or how can the forecast possibly be so far off", Journal of Public Budgeting, Accounting & Financial Management, Vol. 18 No. 1, pp. 100-126. https://doi.org/10.1108/JPBAFM-18-01-2006-B005
Publisher
:Emerald Publishing Limited
Copyright © 2006 by PrAcademics Press