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Estimating Prudent Budgetary Margins for 11 EU Countries: A Simulated SVAR Model Approach

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  • Thomas Dalsgaard
  • Alain de Serres

Abstract

In this paper, a structural VAR model is estimated for 11 EU countries in order to assess the effect on the government deficit ratio of four independent economic disturbances: supply, fiscal, real private demand and monetary shocks. Based on the estimated distribution of these shocks, stochastic simulations are performed to derive estimates of cyclically-adjusted budget balances that would have to be maintained to avoid breaching the Stability and Growth Pact’s 3 per cent of GDP deficit limit over different time horizons and with varying degrees of confidence. In order to capture the movement in the deficit stemming from automatic stabilisation, fiscal policy shocks are turned off during the simulations. The results suggest that, for the majority of countries, if governments were to aim for a cyclically-adjusted budget deficit between 1.0 and 1.5 per cent of GDP, the actual deficit would, with a 90 per cent likelihood, remain within the 3 per cent limit over a three-year horizon ... Dans cette étude, les auteurs estiment un modèle VAR structurel pour 11 pays de l’union européenne afin d’évaluer l’effet sur le solde budgétaire du secteur public en proportion du PIB de quatre chocs économiques indépendants, soit des chocs de politique fiscale et monétaire ainsi que des chocs d’offre et de demande réelle du secteur privé. A partir de la distribution estimée de ces chocs, des simulations stochastiques sont utilisées pour dériver des estimations du solde budgétaire corrigé des influences conjoncturelles qui permettraient de minimiser les risques que la limite de 3 pour cent fixée dans le cadre du Pacte de Stabilité et Croissance ne soit franchi sur divers horizons temporels et pour différents seuils de confiance. Les chocs de politique fiscale sont maintenus à zéro au cours des simulations afin de ne prendre en compte que le mouvement du solde budgétaire qui relève des effets de stabilisation automatique. Il ressort de l’analyse que si les gouvernements visaient un ...

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 216.

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Date of creation: 25 Jun 1999
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Handle: RePEc:oec:ecoaaa:216-en

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