Modeling the Louisiana Local Government Fiscal Module in a Disequilibrium Environment: A Modified COMPAS Model Approach

Abstract. The objective of this study is to assess and measure the relative forecasting performance of local government expenditures in Community Policy Analysis Models (COMPAS) during periods of supply/demand disequilibrium. We evaluate whether a fiscal module under the COMPAS framework (an equilibrium model) fits better under a disequilibrium economic en- vironment. We find that both a simple naïve model with one year lagged expenditure and a lagged expenditure model with revenue capacity variables significantly increased forecasting performance relative to the traditional supply/demand equilibrium model of the public sec- tor. We also found weak evidence suggesting that in cases where the equilibrium model is used in a cross-sectional setting, quantile regression may improve forecasting performance given the heterogeneity in the quantity and quality of preferences in public services.

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Journal of Regional Analysis and Policy, 43, 2
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 Record created 2017-04-01, last modified 2020-10-28

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