The various reforms of the Stability and Growth Pact (1996) strengthened the European Commission’s monitoring of EU member states’ public finance. Failure to comply with the 3% public deficit limit triggers an audit. In this paper, we present a machine learning – based forecasting model for compliance with the 3% limit. We use data from 2006 to 2018 (a turbulent period including the Global Financial Crisis and the Sovereign Debt Crisis) for the 28 EU member states. After identifying 8 features as predictors among 138 variables, forecasting is performed using a support vector machine (SVM) algorithm. The proposed model achieves a forecasting accuracy of nearly 92 % and outperforms the logit model used as a benchmark.
|Author:||Amelie; Kea; Theophilos, Barbier-Gauchard; Baret; Papadimitriou|
|No. of pages:||5|