Short and long-term forecasting by the Netherlands Bureau for Economic Policy Analysis (CPB): science, witchcraft, or practical tool for policy?

Bos, Frits and Teulings, Coen (2013): Short and long-term forecasting by the Netherlands Bureau for Economic Policy Analysis (CPB): science, witchcraft, or practical tool for policy? Published in: OECD Journal on Budgeting , Vol. 1, No. 2013 (2013): pp. 45-56.

Abstract

This paper discusses five different types of forecasts by CPB: forecasts for next year, forecasts for next period of government, analyses of the sustainability of public finance, long-term scenarios and long-term effects of election platforms. CPB forecasts for next year and for the next period of government should be seen as well-motivated estimates based on all recent information, plausible assumptions and expected trends. The more distant the look into the future, the more uncertain are the forecasts. For such long-term analyses, the CPB employs scenarios, extended sensitivity analyses and identification of major political choices. Policy making is like sailing in fog. The regular set of CPB forecasts helps to look forward and to monitor whether a change of course is necessary. Despite fundamental uncertainty about the future, the CPB forecasts provide a good base for political discussions and decision making, like a coalition agreement, budget and wage rate negotiations and defining a long-term policy strategy. These forecasts inform Dutch society, reduce transaction costs in economic and political decision making, and foster consensus on economic and fiscal policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: macroeconomic forecasting and government policy, accuracy of forecasts, uncertainty and public decision making, measurement in economics, CPB Netherlands Bureau for Economic Policy Analysis
• Subjects: A - General Economics and Teaching > A1 - General Economics > A11 - Role of Economics ; Role of Economists ; Market for Economists; C - Mathematical and Quantitative Methods > C0 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation: Models and Applications; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F47 - Forecasting and Simulation: Models and Applications; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation; H - Public Economics > H6 - National Budget, Deficit, and Debt > H68 - Forecasts of Budgets, Deficits, and Debt

References

Bos, F. (2008), “The Dutch fiscal framework: history, current practice and role of the Central Planning Bureau”, OECD Journal on Budgeting, 2008(1):7-48.

Bos, F. and C. Teulings (2010), “CPB and Dutch fiscal policy in view of the financial crisis and ageing”, CPB Document 218. www.cpb.nl/sites/default/files/publicaties/download/doc218.pdf

Bos, F. and C. Teulings (2012), “Evaluating election platforms: a task for fiscal councils? Scope and rules of the game in view of 25 years of Dutch practice” in Rules and Institutions for Sound Fiscal Policy after the Crisis, Banca d’Italia, pp. 417-442 (also downloadable as MPRA paper No. 31536). mpra.ub.uni-muenchen.de/31536/1/MPRA_paper_31536.pdf

Bos, F. and C. Teulings (2013), “Netherlands: Fostering consensus on fiscal policy”, Chapter 7 in G. Kopits (ed.), Restoring Public Debt Sustainability: The Role of Independent Fiscal Institutions, Oxford University Press; an earlier draft was published in 2012 as “The World’s Oldest Fiscal Watchdog: CPB’s Analyses Foster Consensus on Economic Policy”, CPB Discussion Paper 2007. www.cpb.nl/sites/default/files/publicaties/download/dp207the-worlds-oldest-fiscal-watchdog_0.pdf

Coats, A.W. (1989), “Economic ideas and economists in government”. In: D. Colander and A.W. Coats (eds), The spread of economic ideas, Cambridge University Press, pp. 109-1118.

CPB (2006), “Charting choices 2008-2011: economic effects of eight election platforms”, CPB Document 139, www.cpb.nl/en/publication/charting-choices-2008-2011-economic-effects-eight-election-platforms.

CPB (2010a), “Economische verkenning 2011-2015”, CPB Document 203.

CPB (2010b), “Saffier II, 1 model voor de Nederlandse economie, in 2 hoedanigheden, voor 3 toepassingen”, CPB Document 217.

CPB (2012), “Juniraming 2012: De Nederlandse economie tot en met 2017, inclusief Begrotingsakkoord 2013”, CPB Policy Brief, 2012/01.

CPB and Planbureau voor de Leefomgeving (2010), “Keuzes in kaart 2011-2015; effecten van negen verkiezingsprogramma’s op economie en milieu”, CPB Special Publication 85.

CPB and Planbureau voor de Leefomgeving (2012), “Keuzes in kaart 2013-2017; een analyse van tien verkiezingsprogramma’s”.

Elk, R. van, D. Lanser and S. van Veldhuizen (2011), “Onderwijsbeleid in Nederland; de kwantificering van effecten”, CPB Background Paper.

Ewijk, C. van, A. van der Horst and P. Besseling (2013), “The future of health care”, CPB Policy Brief 2013/03. www.cpb.nl/sites/default/files/publicaties/download/cpb-policy-brief-2013-03-future-health-care.pdf

Friedman, M.R. (1980), Free to Choose: A Personal Statement, Harcourt, New York, United States.

Gelauff, G. (2012), “CPB Scenario’s door de tijden heen”, presentatie bij symposium ter gelegenheid van benoeming van Henri de Groot tot hoogleraar aan de Vrije Universiteit van Amsterdam.

Horst, A. van der, L. Bettendorf, N. Draper, C. van Ewijk, R. de Mooij and H. ter Rele (2010), “Vergrijzing verdeeld; toekomst van de Nederlandse overheidsfinanciën”, CPB Special Publication 86.

Huizinga, F. and B. Smid (2004), “Vier vergezichten op Nederland; productie, arbeid en sectorstructuur in vier scenario’s tot 2040”, CPB Special Publication 55.

Janssen, L.H.J.M., V.R. Okker and J. Schuur (ed.) (2006), Welvaart en leefomgeving; een scenariostudie voor Nederland in 2040, joint publication by CPB, MNP and RPB.

Jong, J. de, M. Roscam Abbing and J. Verbruggen (2010), “Voorspellen in crisistijd: de CPB-ramingen tijdens de Grote Recessie”, CPB Document 207.

Mooij, R. de and P. Tang (2003), “Four Futures of Europe”, CPB Special Publication 49, www.cpb.nl/en/publication/four-futures-europe.

Rajan, R.G. (2005), “Has financial development made the world riskier?”, NBER Papers No. 11728.

Rajan, R.G. (2010), Fault Lines: How Hidden Fractures Still Threaten the World Economy, Princeton University Press, Princeton, New Jersey, United States.

Read, L. (1958), “I, Pencil: My Family Tree as told to Leonard E. Read”, The Freeman, 8(12):32-37.

Reinhart, C.M. and K. Rogoff (2009), This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, Princeton, New Jersey, United States.

Taleb, N.N. (2007), The Black Swan: The Impact of the Highly Improbable, Random House.

Weel, B. ter, A. van der Horst and G. Gelauff (2010), “The Netherlands of 2040; strengthen cities to prepare the Netherlands for the future”, CPB Special Publication 88. www.cpb.nl/sites/default/files/publicaties/download/netherlands-2040.pdf