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Structural Budget Deficits and Fiscal Stance

Author

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  • Patrice Muller

    (OECD)

  • Robert Price

    (OECD)

Abstract

Conventionally, fiscal policy analysis makes a distinction between "discretionary" budget changes and "built-in stability". This distinction is the first step to defining a structural budget balance operationally. Budget deficits vary automatically with the business cycle. Revenues automatically rise as the economy expands; unemployment transfers are reduced, leaving a deficit or surplus at the cyclical peak which may be termed a "structural" budget balance. The "built-in stabilizer" component of the deficit should be self-cancelling as the cyclical output gap is closed so that it is temporary and non-structural. A structural budget deficit is then that excess of public spending over revenues which would persist if the economy were to grow steadily at its highest sustainable employment rate, i.e. at the same rate as potential output.

Suggested Citation

  • Patrice Muller & Robert Price, 1984. "Structural Budget Deficits and Fiscal Stance," OECD Economics Department Working Papers 15, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:15-en
    DOI: 10.1787/050184860264
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    Cited by:

    1. Martin Feldstein & Philippe Bacchetta, 1991. "National Saving and International Investment," NBER Chapters, in: National Saving and Economic Performance, pages 201-226, National Bureau of Economic Research, Inc.
    2. Ian M. McDonald, 1985. "Macroeconomic Policy in Australia Since the Sixties," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 18(3), pages 6-19, September.
    3. Urszula Kosterna, 1996. "The State of Public Finances in Post-socialist, Central European Economies: a Comparison with the European Union Countries," CASE Network Studies and Analyses 0076, CASE-Center for Social and Economic Research.
    4. Marcel, Mario, 2001. "Balance Estructural del Gobierno Central. Metodología y Estimaciones para Chile [Structural Bazlance of Central Government. Methodology and estimates for Chile]," MPRA Paper 43338, University Library of Munich, Germany.
    5. J. W. Nevile, 1990. "Structural Deficits and Fiscal Policy Stance in Australia, 1966–67 to 1988–89," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 23(4), pages 24-32, December.
    6. Wissem KHANFIR, 2018. "Structural budget balance and fiscal policy stance in Tunisia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(617), W), pages 145-154, Winter.

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