Cyclically neutral generational accounting
AbstractThis paper introduces a methodological innovation into Generational Accounting. By incorporating cyclically-adjusted balances into the forward-looking budget projections underlying the concept we isolate pure policy effects, which render comparisons of the fiscal sustainability indicators obtained across time and countries truly meaningful. We also show that a demographic effect and a debt effect may bias fiscal sustainability measures over time, and establish a routine to control for these effects in the generational accounting framework. An empirical application for Spain illustrates that our proposed decomposition of indicators is empirically relevant. Standard generational accounting suggests that fiscal sustainability in Spain improved substantially in preparing for EMU. However, calculation of the pure policy effects reveals that this has not been the case. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-099.
Date of creation: 2013
Date of revision:
Fiscal Sustainability; Demographic Ageing; Cyclically-Adjusted Budget Balance; Spain;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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