In this paper, we present a new model of UK public finances which aims to shed light on recent problems of forecasting the PSBR. The main elements of public spending are treated as endogenous variables which rise in line with GDP over the medium term. Also, the cyclical response of public borrowing to rises in the level of economic activity is more muted when growth is export-led than when it is consumer-led. These two features go a long way towards explaining the rapid deterioration of public finances in the early 1990s and the slow pace of improvement since 1993.
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.
Volume (Year): 19 (1998) Issue (Month): 1 (February) Pages: 63-81 Download reference. The following formats are available: HTML
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Handle: RePEc:ifs:fistud:v:19:y:1998:i:1:p:63-81
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Find related papers by JEL classification: C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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