Investigating the Performance of Budget Designers in Forecasting Government Revenues in the Iranian Economy

The purpose of this study is to investigate the performance of budget designers in forecasting government revenues in the Iranian economy. For this purpose, three methods, including analysis with statistical indicators, equation of error component separation, and macroeconomic regression model have been used in order to analyze the prediction errors in tax, oil and gas revenues, and income from property and sale of public goods and services during 1973-2011. The results show that forecasts of all government revenues by budget designers were optimistic (over-estimated), on average, and the highest forecasting errors belonged to revenues from government ownership. The results of the second method show that the forecasting errors in four kinds of government revenues have been mainly nonsystematic and influenced by exogenous shocks and factors. Furthermore, the results of the third method, in which the factors affecting prediction of government revenue were evaluated using the seemingly unrelated regression equations (SURE), show that the non-oil GDP and the exchange rate had significant effects on the forecast of all government revenues. However, inflation and unemployment rates were effective only in predicting tax revenue and income from the sale of goods and services.