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Measuring Cyclically-adjusted Budget Balances for OECD Countries

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  • Nathalie Girouard
  • Christophe André

Abstract

Measuring cyclically-adjusted budget balances for OECD countries An important tool in the analysis of fiscal policy is the distinction between structural and cyclical components of the budget balance. This paper describes work undertaken to re-estimate and re-specify the elasticities underlying the Economics Department's calculations of cyclically-adjusted budget balances. Account is taken of tax reforms introduced since the previous updating exercise. A number of methodological innovations have been introduced to better account for the lags between taxes and activity and to ensure greater cross-country consistency in the estimates. The methodology underlying cyclical adjustment of expenditures has also been reviewed. Finally, the country coverage has been extended. The overall results are broadly consistent with the previous set of estimates. The sensitivity of government net lending to a 1 percentage point change in the output gap remains at around 0.5% of GDP for OECD economies on average. Mesurer le solde budgétaire corrigé des fluctuations cycliques pour les pays de l'OCDE La distinction entre les composantes structurelle et cyclique du solde budgétaire est un outil essentiel de l'analyse de la politique budgétaire. Cette étude présente le travail de ré-estimation et de re-modélisation entrepris afin de mettre à jour les élasticités sous-jacentes au calcul par le Département des Affaires Economiques du solde budgétaire corrigé des fluctuations conjoncturelles. Les réformes fiscales mise en œuvre depuis le dernier exercice de mise à jour ont été prises en compte. Un certain nombre d'améliorations méthodologiques ont été introduites afin de mieux tenir compte des délais d'ajustement entre les recettes fiscales et l'activité économique ainsi que pour assurer une meilleure cohérence des estimations entre les pays. La méthodologie utilisée pour l'ajustement cyclique des dépenses a aussi été revue. Finalement, le nombre de pays couvert a été augmenté. Les résultats globaux sont, dans l'ensemble, cohérents avec les estimations précédentes. La sensibilité du solde financier des administrations publiques à un changement d'un point de pourcentage de l'écart de production demeure autour de 0.5% du PIB pour la moyenne des pays de l'OCDE.

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File URL: http://dx.doi.org/10.1787/787626008442
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 434.

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Date of creation: 04 Jul 2005
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Handle: RePEc:oec:ecoaaa:434-en

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Related research

Keywords: public finances; automatic stabilisers; business cycles; fiscal policy; finances publiques; politique budgétaire; stabilisateurs automatiques; cycle économique;

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  1. Vincent Koen & Paul van den Noord, 2005. "Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting," OECD Economics Department Working Papers 417, OECD Publishing.
  2. Stephen Murchison & Janine Robbins, . "Fiscal Policy and the Business Cycle: A New Approach to Identifying the Interaction," Working Papers-Department of Finance Canada 2003-06, Department of Finance Canada.
  3. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
  4. Gabor Vadas & Gabor P.Kiss, 2005. "Mind the Gap – International Comparison of Cyclical Adjustment of the Budget," Public Economics 0512010, EconWPA.
  5. Vladimir Bezdek & Kamil Dybczak & Ales Krejdl, 2003. "Czech Fiscal Policy: Introductory Analysis," Working Papers 2003/07, Czech National Bank, Research Department.
  6. Bouthevillain, Carine & Cour-Thimann, Philippine & van de Dool, Gerrit & Hernández de Cos, Pablo & Langenus, Geert & Mohr, Matthias & Momigliano, Sandro & Tujula, Mika, 2001. "Cyclically adjusted budget balances: an alternative approach," Working Paper Series 0077, European Central Bank.
  7. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
  8. Gábor P. Kiss & Gábor Vadas, 2004. "Mind the Gap – Watch the Ways of Cyclical Adjustment of the Budget Balance," MNB Working Papers 2004/7, Magyar Nemzeti Bank (the central bank of Hungary).
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