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

  • 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))

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.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 2 (July)
Pages: 79-99

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Handle: RePEc:rjr:romjef:v::y:2010:i:2:p:79-99
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  1. 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.
  2. 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.
  3. Wolswijk, Guido, 2007. "Short- and long-run tax elasticities: the case of the Netherlands," Working Paper Series 0763, European Central Bank.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
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