Regional Government Revenue Forecasting: Risk Factors of Investment Financing

Abstract

Accurate revenue prediction is a key factor for the reliable determination of the investment part of entire regional and local budgets, particularly during economic downturns and fiscal uncertainty. An unexpected decline in revenue requires the reduction in capital expenditures and forces the regional government to find additional sources to close the budget gaps. Current studies indicate that budget forecasts often underpredict revenue and use the available information inefficiently. In this article, the authors examine chosen methods of forecasting regional government revenue. In addition to classical forecasting models based on time series and causal models, an original structural forecasting procedure was proposed, which is effective especially in case of data delay. The reliability of applied methods was assessed using data from the Polish area of Zachodniopomorskie over the period 2000–2018. The found evidence supported results that were obtained by many other researchers, which indicated that less comprehensive methods of forecasting can provide reasonably accurate estimates.

Keywords

• regional government revenue
• forecasting
• structural forecasting
• regional gross product