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Understanding and Confronting Uncertainty: Revisions to UK Government Expenditure Plans

Chadha, Jagjit S. and Hantzsche, Arno and Lazarowicz, Thomas and Pabst, Adrian and Young, Garry (2018) Understanding and Confronting Uncertainty: Revisions to UK Government Expenditure Plans. Discussion paper. National Institute of Economic and Social Research, London, UK

Abstract

We develop a simple model that motivates fiscal stabilisation policy, in the presence of economic and control uncertainty. An examination of a real-time database of economic variables and forecasts shows that our knowledge of the current and future state of the economy is subject to significant revisions over time. Multi-year government spending plans are also significantly revised over successive fiscal events. We show the risk for any given government expenditure plan by constructing measures of historical expenditure revisions. We also show that the most significant factor in explaining public expenditure revisions are changes to the expected path of GDP growth. We illustrate how to model the components of public expenditure and are thus able to remark on the extent to which expenditure is warranted. Finally we report on findings from interviews with key policymakers in the past 25 years on how fiscal expenditure was managed and uncertainty confronted.

Item Type: Monograph (Discussion paper)
Additional information: NIESR Discussion Paper No. 495
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Politics and International Relations
Depositing User: Adrian Pabst
Date Deposited: 27 Oct 2018 22:55 UTC
Last Modified: 29 May 2019 21:21 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/69818 (The current URI for this page, for reference purposes)
Chadha, Jagjit S.: https://orcid.org/0000-0001-7549-9027
Pabst, Adrian: https://orcid.org/0000-0002-3153-1598
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