ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Monitoring Budget Deficits through Time Series Models

Time Series Models Introduction ON August 28, 1990 while making a statement in parliament giving, for the first time, the levels of budget deficits as at the end of the first four months of the financial year, the union minister of finance had placed on the table of the house a Technical Note (TN) reviewing the actual developments in the budgetary situation. It was stated that with the deficit at Rs 9,926 crore by end of July 1990, the government had succeeded in reducing the budget deficit by Rs 1,500 crore from the last year's level. The government .expected that the budget deficit at end of March 1991 would be in the range of Rs 7,900-8,500 crore. The TN had tried five methods and had selected Box-Jenkins (Box) method on the basis of its performance in terms of accuracy of forecasts of budget deficits. Madhur and Wadhwa [1991] have suggested an alternative ARIMA model (Box (MW)) for forecasting budget deficits and shown that forecasts generated by that model were superior to those obtained in the TN. This paper explains certain other time series models which prove more accurate for forecasting budget deficits.

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