Title: Fiscal forecasts at the FOMC: Evidence from the Greenbooks
Authors: Dean Croushore - University of Richmond (United States) [presenting]
Abstract: New data set of fiscal policy forecasts and estimates prepared for the FOMC are used to understand how they have influenced U.S. monetary policy. We find limited evidence of forecast bias and that the forecasts contain useful information beyond that in the CBO's forecasts. Forecast errors for the fiscal variables have been only weakly correlated with forecast errors for inflation and output growth, but those for the budget surplus are much more highly correlated with those for the unemployment rate and the output gap. Some fiscal variables can also account for a significant fraction of the ``exogenous'' changes in the federal funds rate target previously studied, which is consistent with the Board's statements on the importance of fiscal policy.