Economic Thought and Practice, , 2026.
Original scientific paper
https://doi.org/10.17818/EMIP/2026/21
WHY DO MEDIUM-TERM EXPENDITURE FORECASTS FAIL? NEW EVIDENCE FROM PANEL DATA
Berat Kara
; Istanbul Medeniyet University, Türkiye, Faculty of Political Science
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* Corresponding author.
Abstract
This study examines the macroeconomic determinants of medium-term expenditure forecast errors in advanced economies from 2005 to 2024, focusing on two- and three-year horizons. Using panel data methods, it analyses the roles of unemployment, economic growth, inflation, the current account balance, public debt, fiscal rules, and major crisis periods. The results show that unemployment is the most consistent determinant of forecast errors across all models and horizons, highlighting the importance of labour market conditions for fiscal planning. Inflation is significant only at longer horizons, indicating that its effects accumulate over time. GDP growth has limited and model-dependent relevance, while public debt and fiscal rules do not show a systematic effect on forecast accuracy. Major crises are associated with substantial increases in forecast errors and account for much of the models’ explanatory power.
Keywords
medium-term budgeting; budget forecasting; medium-term forecasting; expenditure forecasting; budget accuracy
Hrčak ID:
346612
URI
Publication date:
29.4.2026.
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