Indicators of the Cyclically Adjusted Budget Balance

Bank of Italy – Indicators of Structural Budget Balances Conference, p. 217, 1998

34 Pages Posted: 18 Jul 2012

See all articles by Anne Brunila

Anne Brunila

Ministry of Finance, Finland

Mika Tujula

European Central Bank (ECB)

Date Written: November 28, 1998

Abstract

Brunila and Tujula suggest that estimating output gaps using a production function may be preferable in the presence of large structural breaks in the economy. In the Finnish experience, they show that the qualitative conclusions are not overly sensitive to the choice of method (HP filter or production function approach) until the early 1990s. As major structural breaks occurred in the Finnish economy in the late 1980s and early 1990s, the divergences between the results of the two methods became large. The authors tend to support the indications provided by the production function approach, suggesting that it can more readily incorporate auxiliary information concerning structural change.

Suggested Citation

Brunila, Anne and Tujula, Mika, Indicators of the Cyclically Adjusted Budget Balance (November 28, 1998). Bank of Italy – Indicators of Structural Budget Balances Conference, p. 217, 1998, Available at SSRN: https://ssrn.com/abstract=2109654

Anne Brunila (Contact Author)

Ministry of Finance, Finland ( email )

P.O BOX 28
FIN-00023
Finland
+358 9 160 33191 (Phone)

Mika Tujula

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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