The Relevance of Cyclically-Adjusted Public Balance Indicators - The French Case

Bank of Italy – Indicators of Structural Budget Balances Conference, p. 325, 1998

28 Pages Posted: 18 Jul 2012

See all articles by Alain Quinet

Alain Quinet

Ministere de l’Economie, des Finances et de l’Industrie – France

Carine Bouthevillain

Banque de France

Date Written: November 28, 1998

Abstract

Bouthevillain and Quinet discuss the adjustment for the effects of fluctuations in the inflation rate. The paper points out the problems that arise in the measurement of these effects, especially because the impact of price changes may considerably differ according to whether they are expected or unexpected. It should also be considered that it is difficult to define and measure price fluctuations, given the existence of a continuum of possible levels of equilibrium for inflation.

The authors present, together with a method belonging to the “gap elasticity” category, an application of VARs which, following the approach developed in Blanchard and Quah, decomposes the fluctuations in the deficit-to-GDP ratio into those arising from output and those arising from the deficit itself. The cyclical component of the deficit is defined as the accumulation of output shocks over the period. The authors assign to the VAR-based-method the role of complementing the more traditional approach.

Suggested Citation

Quinet, Alain and Bouthevillain, Carine, The Relevance of Cyclically-Adjusted Public Balance Indicators - The French Case (November 28, 1998). Bank of Italy – Indicators of Structural Budget Balances Conference, p. 325, 1998, Available at SSRN: https://ssrn.com/abstract=2109660

Alain Quinet (Contact Author)

Ministere de l’Economie, des Finances et de l’Industrie – France ( email )

Télédoc 151
139, rue de Bercy 75572
Paris, Cedex 12
France

Carine Bouthevillain

Banque de France ( email )

Paris
France

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