engleski

Do we need to cut back governments’ forecasts: optimism as the rule of thumb?

The purpose of this research is to prove government institutions’ forecasting bias toward over-optimism. It has already been shown that private sector forecasts are less biased and more accurate than the ones performed by international agencies. However, it can be argued that this is not as dangerous as potential robust and systematic optimistic forecasting bias of government institutions. On the sample of seven Central and Eastern European countries we found that in six of them government institutions and private forecasting institutions systematically overrate real GDP growth rates. Also, in six of them ministries of finance GDP forecasts are steadily higher than private institutions forecasts. In five countries central banks tend to overrate GDP growth rates. However, central banks tend to be less overoptimistic than private forecasters.

Economic forecasts; Policymakers’ forecast bias; Central banks’ efficiency; Public finance sustainability

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