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Real-Time Measures of the Output Gap and Fiscal Policy Stance

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  • Virkola, Tuomo

Abstract

This paper studies real-time measures of the output gap and fiscal policy stance estimates for EU countries. We construct a comprehensive real-time data set on fiscal forecasts and study whether there are systematic differences between the European Commission and IMF estimates of the output gap and structural budget balance. We argue that differences in the EC and the IMF estimates should provide a lower bound for the potential heterogeneity that is likely to emerge when national governments begin to release their estimates of the output gap and structural budget balance as required by the new fiscal rules in the EU. We find evidence that while the two institutions are likely to agree on cyclical conditions and fiscal policy measures in EU countries after the fact, there are statistically significant differences in their real-time estimates of the output gap and structural budget balance.

Suggested Citation

  • Virkola, Tuomo, 2014. "Real-Time Measures of the Output Gap and Fiscal Policy Stance," ETLA Reports 37, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:37
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    Cited by:

    1. Kuusi, Tero, 2018. "Does the structural budget balance guide fiscal policy pro-cyclically? Evidence from the Finnish Great Depression of the 1990s," MPRA Paper 84829, University Library of Munich, Germany.

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    More about this item

    Keywords

    Business cycles; Fiscal policy; Forecasting;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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