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Estimating The Cyclically Adjusted Budget Balance For The Romanian Economy. A Robust Approach

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  • Altar, Moisa

    () (DOFIN, Academy of Economic Studies, Bucharest; Center for Advanced Research in Finance and Banking (CARFIB); Centrul de Analiză şi Prognoză Economico-Financiară (CAPEF))

  • Necula, Ciprian

    (DOFIN, Academy of Economic Studies, Bucharest; Center for Advanced Research in Finance and Banking (CARFIB); Centrul de Analiză şi Prognoză Economico-Financiară (CAPEF))

  • Bobeica, Gabriel

    (DOFIN, Academy of Economic Studies, Bucharest; Center for Advanced Research in Finance and Banking (CARFIB); Centrul de Analiză şi Prognoză Economico-Financiară (CAPEF))

Abstract

This paper provides estimates for the structural fiscal balance for the Romanian economy over the period 1998-2008. The calculation of the structural fiscal balance is useful, since it provides a clear picture of the fiscal stance of the economy and it is essential in the context of a medium term fiscal framework. In order to ensure the robustness of the estimation, we employed two methodologies for the computation of the elasticities of various categories of government revenues and expenditures with respect to the output gap. The two approaches issued similar results, the overall average budget sensitivity being equal to 0.285 and 0.290, respectively. The amplitude of the cyclical budget balance is around 1% of GDP. After constant improvement, the structural balance worsened in 2008, due mainly to the current crisis.

Suggested Citation

  • Altar, Moisa & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating The Cyclically Adjusted Budget Balance For The Romanian Economy. A Robust Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 79-99, July.
  • Handle: RePEc:rjr:romjef:v::y:2010:i:2:p:79-99
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    References listed on IDEAS

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    1. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
    2. Cécile Denis & Daniel Grenouilleau & Kieran Mc Morrow & Werner Röger, 2006. "Calculating potential growth rates and output gaps - A revised production function approach," European Economy - Economic Papers 2008 - 2015 247, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Wolswijk, Guido, 2007. "Short- and long-run tax elasticities: the case of the Netherlands," Working Paper Series 763, European Central Bank.
    4. Sven Langedijk & Martin Larch, 2007. "Testing the EU fiscal surveillance: How sensitive is it to variations in output gap estimates?," European Economy - Economic Papers 2008 - 2015 285, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. 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.
    6. Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
    7. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
    8. Nathalie Girouard & Robert W. R. Price, 2004. "Asset Price Cycles, “One-Off” Factors and Structural Budget Balances," OECD Economics Department Working Papers 391, OECD Publishing.
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    Citations

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    Cited by:

    1. Stanova, Nadja, 2015. "Fiscal discretion, growth and output volatility in new EU member countries," MPRA Paper 63946, University Library of Munich, Germany.
    2. Mirdala, Rajmund, 2016. "Effects of Fiscal Policy Shocks in the Euro Area (Lessons Learned from Fiscal Consolidation)," MPRA Paper 79920, University Library of Munich, Germany.
    3. Marko Crnogorac & Santiago Lago Peñas, 2017. "Cyclical sensitivity of public finances in former Yugoslavian countries (2001–2014)," Working Papers. Collection A: Public economics, governance and decentralization 1701, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Iancu, Aurel & Olteanu, Dan, 2015. "Fiscal Consolidation by Austerity and EU Surveillance Policies," Working Papers of National Institute of Economic Research 151209, National Institute of Economic Research.
    5. Rajmund Mirdala, 2013. "Lessons Learned from Tax vs. Expenditure Based Fiscal Consolidation in the European Transition Economies," William Davidson Institute Working Papers Series wp1058, William Davidson Institute at the University of Michigan.
    6. Rajmund Mirdala, 2013. "Fiscal Imbalances and Current Account Adjustments in the European Transition Economies," William Davidson Institute Working Papers Series wp1065, William Davidson Institute at the University of Michigan.
    7. Mirdala, Rajmund, 2013. "Lessons Learned from Tax versus Expenditure Based Fiscal Consolidation in the European Transition Economies," MPRA Paper 46792, University Library of Munich, Germany.
    8. Iancu, Aurel, 2011. "Models of Financial System Fragility," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 230-256, March.
    9. Iancu, Aurel, 2011. "Financial System Fragility Models," Working Papers of National Institute of Economic Research 110211, National Institute of Economic Research.

    More about this item

    Keywords

    fiscal policy; structural fiscal balance; cyclical budget balance; business cycle; tax elasticity;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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