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Konjunktur und Generationenbilanz – eine Analyse anhand des HP-Filters / Business Cycle Effects on Generational Accounting – An Analysis using the HP-Filter

Author

Listed:
  • Benz Ulrich

    (Vormals Forschungszentrum Generationenverträge, heute Finanzministerium Baden- Württemberg, Neues Schloss, Schlossplatz 4, 70173 Stuttgart, Germany)

  • Hagist Christian

    (Forschungszentrum Generationenverträge der Albert-Ludwigs-Universität Freiburg, Brunnenstr. 17, 79098 Freiburg im Breisgau, Germany)

Abstract

Generational accounting is - given the future demographic developments in OECD countries - an established tool to quantify the fiscal situation of public coffers. However, as all economic methods dealing with future developments it has critical points. One in particular is the calibration on one base year which neglects business cycle effects on the generational accounts. This paper aims to analyze in which way and to which degree generational accounts and the associated sustainability indicators are biased due to the neglecting of business cycle effects. To do this we use the Hodrick-Prescott-Filter to estimate the business cycle effects for the German general government budgets from 1996 to 2005. We then calculate sustainability indicators based on all years given the actual and the business cycle adjusted budgets. It can be stated that the neglect of the business cycle definitively has an effect on the outcomes of the generational accounting framework. However the magnitude of this effect is rather small, at least for Germany. As a by-product of our analysis, we show that the German fiscal policy was rather pro-cyclical during the examined time frame and that the effects of these policies on the generational accounts are larger than the business cycle effects.

Suggested Citation

  • Benz Ulrich & Hagist Christian, 2008. "Konjunktur und Generationenbilanz – eine Analyse anhand des HP-Filters / Business Cycle Effects on Generational Accounting – An Analysis using the HP-Filter," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(4), pages 299-316, August.
    • Handle: RePEc:jns:jbstat:v:228:y:2008:i:4:p:299-316
    DOI: 10.1515/jbnst-2008-0402
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    References listed on IDEAS

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    1. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110, National Bureau of Economic Research, Inc.
    2. Volker Börstinghaus & Georg Hirte, 2002. "Generational Accounting versus Computable General Equilibrium," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 227-243, July.
    3. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1992. "Social Security and Medicare Policy from the Perspective of Generational Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 6, pages 129-145, National Bureau of Economic Research, Inc.
    4. Benz, Ulrich & Hagist, Christian, 2008. "Technischer Anhang zu "Konjunktur und Generationenbilanz: Eine Analyse anhand des HP-Filters"," FZG Discussion Papers 23, University of Freiburg, Research Center for Generational Contracts (FZG).
    5. Ulrich Benz & Stefan Fetzer, 2006. "Indicators for Measuring Fiscal Sustainability: A Comparison of the OECD Method and Generational Accounting," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 367-391, September.
    6. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
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    Cited by:

    1. Holger Bonin & Concepció Patxot & Guadalupe Souto, 2014. "Cyclically‐Neutral Generational Accounting," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 117-137, June.
    2. Benz, Ulrich & Hagist, Christian, 2008. "Technischer Anhang zu "Konjunktur und Generationenbilanz: Eine Analyse anhand des HP-Filters"," FZG Discussion Papers 23, University of Freiburg, Research Center for Generational Contracts (FZG).

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