This paper aims to identify the factors associated with the forecasting errors in Spain's budget balance during the period 1999–2024. To this end, the annual fiscal projections reported in Stability Programmes (SPs) following the implementation of the Stability and Growth Pact (SGP) have been used.
To achieve this purpose, we use an analysis of cointegration in time series. The dependent variable is the budget balance (% GDP), and the independent variables are divided into three categories: economic, political and institutional. Real GDP forecast errors, the provisional fiscal outcome and the persistence of deviations in fiscal forecasts are included as economic variables. The construction of these three variables is based on information extracted from SPs, as well as official datasets provided by the Instituto Nacional de Estadística (INE) and the Intervención General de la Administración del Estado (IGAE). Political variables on general elections and the ideological orientation of successive governments were obtained from the Comparative Political Dataset (CPDS), and the institutional variable used is the Autoridad Independiente de Responsabilidad Fiscal (AIReF).
Economic and political factors are relevant to explain the fiscal deviations, but the influence of the AIReF is not significant.
There are few studies focused on the analysis of forecast errors for fiscal variables that analyse a single country individually. This research will allow establishing recommendations for the implementation of Spanish fiscal policy in the context of European budgetary governance given the evidence that deviations affect the sustainability of public finances.
