The role of economic and political factors in budget forecasting errors: evidence from Turkey's metropolitan municipalities for the period 2011-2022

Abstract

This study examines budget forecasting errors in 15 major metropolitan municipalities in Turkey for the period 2011-2022 using a random effects panel regression model. The dependent variables include budget surplus, inflation, population growth, unemployment, GDP per capita, export-to-import ratio, mayors' political party, mayors' re-candidacy status, and election periods. Findings show that in the revenue model, budget surplus and unemployment reduce errors, while inflation, population growth, and election years increase them. In the expenditure model, unemployment reduces errors, whereas inflation and election periods increase them. This research is the first of its kind in Turkey, aiming to fill a gap in the literature by identifying factors contributing to budget errors. It highlights the importance of local influences on budget accuracy and seeks to guide budget preparers in improving their forecasts, ultimately enhancing fiscal management and public service delivery.