Institutional Quality and Official Budgetary Forecast Performance in EU Member States

Medium-term budgetary frameworks are institutional arrangements at national level intended to improve the official forecasts of EU member states. The influence of those frameworks, and other variables, on official forecasts of output growth and the budget balance ratio in 24 EU member states over the years 2008 to 2019 is assessed here using quantile regressions. The framework acts to offset undue optimism in forecasting, with that effect tending to be at its strongest at those quantiles where forecasts are at their most optimistic and the attendant danger of the breaching of deficit limits from that source is at its greatest. Such an institution then provides an ameliorating influence against general biases and factors that cause errors in official forecasts.