IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/20594.html
   My bibliography  Save this paper

The Cyclically Adjusted Budget Balance in EU Fiscal Policymaking. Love at First Sight Turned into a Mature Relationship

Author

Listed:
  • Larch, Martin
  • Turrini, Alessandro

Abstract

The cyclically adjusted budget balance (CAB) plays a key role in the EU fi scal surveillance framework. It started off in a supporting role in the shadow of the headline defi cit and, before long, turned into the linchpin of the rules of the Stability and Growth Pact. The steep ascent was driven by high expectations which, with the passing of time, were only partly met. The everyday practice of the EU fi scal surveillance rapidly revealed a number of caveats of the CAB which, at times, hampered the effectiveness of fi scal surveillance. This paper provides a comprehensive review of the changing fortunes of the CAB in the EU fi scal surveillance framework. It portrays its main shortcomings and the way they are dealt with in practice.

Suggested Citation

  • Larch, Martin & Turrini, Alessandro, 2009. "The Cyclically Adjusted Budget Balance in EU Fiscal Policymaking. Love at First Sight Turned into a Mature Relationship," MPRA Paper 20594, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20594
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/20594/1/MPRA_paper_20594.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paunovic, Igor, 2005. "Public debt sustainability in the northern countries of Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. D’Erasmo, P. & Mendoza, E.G. & Zhang, J., 2016. "What is a Sustainable Public Debt?," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2493-2597, Elsevier.
    3. Gossé, Jean-Baptiste & Guillaumin, Cyriac, 2013. "L’apport de la représentation VAR de Christopher A. Sims à la science économique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(4), pages 309-319, Décembre.
    4. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    5. World Bank, 2005. "Dominica : OECS Fiscal Issues, Policies to Achieve Fiscal Sustainability and Improve Efficiency and Equity of Public Expenditures," World Bank Publications - Reports 8681, The World Bank Group.
    6. Volker Meier & Martin Werding, 2010. "Ageing and the welfare state: securing sustainability," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(4), pages 655-673, Winter.
    7. Ronald D. Kneebone & Kenneth J. McKenzie, 1999. "The Characteristics of Fiscal Policy in Canada," Canadian Public Policy, University of Toronto Press, vol. 25(4), pages 483-501, December.
    8. Lankester-Campos, Valerie & Loaiza-Marín, Kerry & Monge-Badilla, Carlos, 2020. "Assessing public debt sustainability for Costa Rica using the fiscal reaction function," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).
    9. Aristovnik, Aleksander, 2008. "How sustainable are fiscal deficits? Evidence from Mediterranean countries," MPRA Paper 12317, University Library of Munich, Germany.
    10. Kazakova, Maria & Nesterova, Kristina, 2015. "Long-Term Forecast of the Main Parameters of the Budgetary System of Russia," Published Papers 2309, Russian Presidential Academy of National Economy and Public Administration.
    11. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "A Balance-Sheet Approach to Fiscal Sustainability," Working Paper Series rwp07-044, Harvard University, John F. Kennedy School of Government.
    12. Carlos Díaz Alvarado & Alejandro Izquierdo & Ugo Panizza, 2004. "Fiscal Sustainability in Emerging Market Countries with an Application to Ecuador," Research Department Publications 4371, Inter-American Development Bank, Research Department.
    13. Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal sustainability in the presence of systemic banks: the case of EU countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(3), pages 436-467, June.
    14. Lane, Philip R. & Perotti, Roberto, 2003. "The importance of composition of fiscal policy: evidence from different exchange rate regimes," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2253-2279, September.
    15. José Francisco Bellod Redondo, 2010. "Pensiones – La Aritmética Del Miedo," Contribuciones a la Economía, Servicios Académicos Intercontinentales SL, issue 2010-03, March.
    16. Carine Meyimdjui, 2020. "Imported Food Price Shocks and Socio-Political Instability: Do Fiscal Policy and Remittances Matter?," IMF Working Papers 2020/248, International Monetary Fund.
    17. Julia Darby & V. Anton Muscatelli & Graeme Roy, "undated". "Fiscal Federalism and Fiscal Consolidation: Evidence from an Event Study," Working Papers 2005_21, Business School - Economics, University of Glasgow, revised Jun 2005.
    18. W.H. Buiter & U Patel, 1995. "Budgetary Aspects of Stabilization and Strucutral Adjustment in India: The Painful Road to a Sustainable Fiscal-Financial-Monetary Plan," CEP Discussion Papers dp0247, Centre for Economic Performance, LSE.
    19. Bruneau, C. & De Bandt, O., 1999. "Fiscal Policy in the Transition to Monetary Union: a Structural VAR Model," Working papers 60, Banque de France.
    20. Moulaye Bamba & Jean-Louis Combes & Alexandru Minea, 2020. "The effects of fiscal consolidations on the composition of government spending," Applied Economics, Taylor & Francis Journals, vol. 52(14), pages 1517-1532, March.

    More about this item

    Keywords

    Cyclically adjusted budget balance; Stability and Growth Pact; Fiscal Policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:20594. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.