International comparisons of fiscal policy: the OECD and the IMF measures of fiscal impulse
AbstractBoth the OECD and the IMF periodically estimate and publish measures of fiscal impulse to gauge the extent to which fiscal policy in the major industrial countries has become more or less expansive over time. This paper compares these measures analytically and numerically. The paper shows that the OECD and IMF measures of fiscal impulse differ in at least four fundamental ways: (1) the OECD includes fiscal drag under the presumption that it is part of the "structure" of fiscal policy, while the IMF excludes it from its adjusted measure of the budget balance; (2) the OECD and the IMF both adjust for cyclical factors but they do so differently; (3) the OECD estimates its marginal tax and expenditure rates from a structural model whereas the IMF assumes unit income-elasticity of its parameters and uses historical average tax and spending rates; and (4) each agency uses different estimates of potential output. The paper then numerically allocates differences in the published figures of the OECD and the IMF to these various sources. The paper assesses the usefulness of each measure.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 274.
Date of creation: 1986
Date of revision:
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- Signe Krogstrup, 2002. "Should We Pay Attention to Indicators of Fiscal Impact on Demand?," IHEID Working Papers 01-2002, Economics Section, The Graduate Institute of International Studies.
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