from the Philadelphia Fed
The surge in fiscal deficits since 2008 has put a renewed focus on our understanding of fiscal policy. The interaction of fiscal and monetary policy during this period has also been the subject of much discussion and analysis. By examining the U.S. Federal Reserve Board staff ’s Greenbook forecasts of fiscal policy, we created a real-time database of the Greenbook forecasts of fiscal policy, examined the forecast performance in terms of bias and efficiency, and explored the implications for the interaction of fiscal policy and monetary policy.
We also attempt to provide advice for fiscal policy by showing how policymakers learn over time about the trajectory of the U.S. federal government’s fiscal balance as well as the changing roles of structural and cyclical factors.