Forecasting fiscal variables in selected European economies using least absolute deviation method

Abstract

Actual economic crisis initiated numerous debates on fiscal policy of the European Union (EU) and unrealistic convergence demands placed upon the Member States, where the emphasis is on fiscal criteria: The budget deficit should not exceed 3% of Gross Domestic Product (GDP) and the public debt must be less than 60% of GDP. The aim of this article is to analyze the impact of the crisis on fiscal variables in selected European countries and to examine the efficacy of conducted reforms through comparing forecasted values, obtained by the least absolute deviation method, with actual values. Analyzed countries are Portugal, Ireland, Greece, Spain, and the Republic of Croatia, the EU countries that were the most exposed to the impact of the crisis and have problems with economic instability. Values were forecasted on the quarter basis for the period 2015 and 2016 using data from 2000 until 2014, and the results show that the proposed method is useful in predicting under unchanged conditions. This leads to the conclusion that analyzed countries did not carry out all the necessary reforms.

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“…Один из аргументов, приводимых российскими исследователями (Minakir, Leonov, 2019), заключается в том, что большая часть государственного долга приходится на реализацию социального обеспечения в противовес инвестиционной деятельности. Работа (Dumitrescua, 2014) (Zaja et al, 2018) провели исследование по прогнозированию финансовых переменных в экономиках отдельных европейских стран (Португалия, Ирландия, Греция, Испания и Республика Хорватия) с использованием метода наименьшего абсолютного отклонения (LAD). На основе анализа фискальных переменных между странами можно отметить истощение сбалансированных бюджетов и преобладание государственного долга.…”

Modelling and Forecasting Foreign Debt Using ARIMA Model: The Zambian Case from 2022 to 2035

“…Government debt is closely related to government expenditure and tax revenue (Chatterjee, Bhattacharya, Taylor, & West, 2019). Meanwhile, the tax revenues, most of the time, are not in line with what has been targeted causing the government to take debt as the only option (Žaja, Kržić, & Habek, 2018). Government debt is not only a means of fundraising to finance public needs, but also an effective tool to stabilize the country's economic development, whose predictive values allow making effective management decisions at the state level and developing effective measures to improve the economic and debt situation (World Bank, 2017; World Bank, 2017).…”