Cyclically Adjusted Budget Balances: An Alternative Approach
ECB Working Paper No. 77
73 Pages Posted: 21 Jul 2003
Date Written: September 2001
Estimates of cyclically-adjusted budget balances, correcting actual government budget balances for business cycle fluctuations, are produced by many institutions. This paper presents an alternative approach for the cyclical adjustment of budget balances. The approach is based on a disaggregated method for the calculation of the cyclical component of the budget balance. In this approach, the effects of changes in theA structure of demand and national income on government revenue and expenditure are captured. Cases where the various macroeconomic bases are in different phases of the cycle or exhibit fluctuations of different magnitude are taken into account in this way. The computation of the cyclical components of these macroeconomic bases is based on the Hodrick-Prescott filter and takes into account the latest evidence presented in the literature about the properties of this filter. The paper also presents new estimates of the elasticities of individual budget items with respect to the relevant macroeconomic variables.
Keywords: fiscal policy; government budget; cyclical adjustment; business cycles
JEL Classification: E32, E60
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Measuring Cyclically-Adjusted Budget Balances for OECD Countries
The Structural Budget Balance: The IMF’s Methodology
Fiscal Policy and the Business Cycle: A New Approach to Identifying the Interaction
By Stephen Murchison and Janine Robbins
Cyclicality of the Danish Government Budget
The Structural Budget Balance the Imf's Methodology
A New Method of Assessing the Structural Budget Balance: Results for the Years 1995-2000
Indicators of the Cyclically Adjusted Budget Balance: The Bank of Finland's Experience
By Anne Brunila, Juhana Hukkinen, ...
A Disaggregated Framework for the Analysis of Structural Developments in Public Finances
By Jana Kremer, Cláudia Rodrigues Braz, ...
Indicators of the Cyclically Adjusted Budget Balance
By Anne Brunila and Mika Tujula