Fiscal credibility, target revisions and disagreement in expectations about fiscal results

Abstract This study aims to answer if fiscal credibility and the primary surplus target revisions affect the market expectation dispersion in relation to the future values of the public debt and the primary budget balance. The paper contributes to the literature on fiscal credibility as well as to the literature related to the disagreement in expectations about fiscal variables. Due to unavailability of data, there are few works that analyze the disagreement in expectations about public debt and the disagreement in expectations about the budget balance. The findings indicate that increases in fiscal credibility reduce the disagreement in expectations. Moreover, the lack of commitment to fiscal target makes it difficult to form expectations about the future path of the fiscal results, heightening disagreement in the forecasts.