The usefulness of infra-annual government cash budgetary data for fiscal forecasting in the euro area

Short-term fiscal indicators based on public accounts data are often used by European policy makers. These indicators represent one of the main sources of publicly available intra-annual fiscal information. Nevertheless, they are not formally included in the European multilateral fiscal surveillance process, and have received limited attention from the academic literature analysing fiscal policies and fiscal forecasting in Europe. By focusing on a broad set of indicators (some 50 fiscal revenue and expenditure items for euro area countries) and a mixed-frequency state-space econometric model, we make a case for the use of monthly cash indicators for multilateral fiscal surveillance at the European level. Their formal use in the public discussion would certainly enhance the pre-emptive arm of the Stability and Growth Pact, making possible to acknowledge fiscal slippages early enough so that pressure to take corrective measures could be set on governments by EU institutions and the public at large.