Measuring Cyclically-Adjusted Budget Balances for OECD Countries

Posted: 1 Jun 2010

See all articles by Nathalie Girouard

Nathalie Girouard

affiliation not provided to SSRN

Christophe Andre

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

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Date Written: July 4, 2005

Abstract

An important tool in the analysis of fiscal policy is the distinction between structural and cyclical components of the budget balance. This paper describes work undertaken to re-estimate and re-specify the elasticities underlying the Economics Department’s calculations of cyclically-adjusted budget balances. Account is taken of tax reforms introduced since the previous updating exercise. A number of methodological innovations have been introduced to better account for the lags between taxes and activity and to ensure greater cross-country consistency in the estimates. The methodology underlying cyclical adjustment of expenditures has also been reviewed. Finally, the country coverage has been extended. The overall results are broadly consistent with the previous set of estimates. The sensitivity of government net lending to a 1 percentage point change in the output gap remains at around 0.5% of GDP for OECD economies on average.

Keywords: Fiscal policy, automatic stabilisers, business cycle, public finances

JEL Classification: E62, H3, H6

Suggested Citation

Girouard, Nathalie and Andre, Christophe, Measuring Cyclically-Adjusted Budget Balances for OECD Countries (July 4, 2005). Available at SSRN: https://ssrn.com/abstract=1618220

Nathalie Girouard

affiliation not provided to SSRN ( email )

Christophe Andre (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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