Structural Balances and All That Which Indicators to Use in Assessing Fiscal Policy

31 Pages Posted: 15 Feb 2006

See all articles by Nigel Chalk

Nigel Chalk

International Monetary Fund (IMF)

Date Written: June 2002

Abstract

Structural indicators of a country`s fiscal position are regularly used as estimates of both discretionary changes in fiscal policy and the effect of fiscal policy on aggregate demand. This paper looks at such indicators and evaluates, from a theoretical standpoint and from empirical case studies, their usefulness in measuring the size of discretionary policy action or fiscal demand stimulus. Two propositions are examined in detail: first, that the change in the primary structural balance provides a better indicator of discretionary fiscal policy than does the change in the primary balance; and second, that the change in the structural balance is a good indicator of the demand stimulus arising from changes in the fiscal position. In addition, the paper discusses measurement problems relating to structural balances and the use of the fiscal impulse as an alternative to structural balances.

Keywords: Structural balances fiscal stimulus weighted budget balance

JEL Classification: E6 H3 H5 H6

Suggested Citation

Chalk, Nigel, Structural Balances and All That Which Indicators to Use in Assessing Fiscal Policy (June 2002). IMF Working Paper, Vol. , pp. 1-31, 2002. Available at SSRN: https://ssrn.com/abstract=879668

Nigel Chalk (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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