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Theoretical foundations, properties and interpretation of the budget gap indicators

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  • Goryunov, Yevgeniy

    () (Gaidar Institute for Economic Policy)

Abstract

Analysis of the sustainability of public finances requires the use of quantitative indicators by which to assess the possible risks of the budget crisis. The article deals with a special class of such indicators - indicators of the budget gap. Budget gap reflects the long-term budgetary imbalances, and a methodology for assessing fiscal sustainability with the use of this index is based on a comparison of the sum of the current size of the debt and the present value of expected future budget expenditure on the one hand, and the present value of future revenues - on the other. The article gives a theoretical justification of the budget gap as an indicator of fiscal sustainability, we discuss some of its properties, and especially the interpretation of its values. An illustrative example based on calculations carried out for the Russian budget.

Suggested Citation

  • Goryunov, Yevgeniy, 2016. "Theoretical foundations, properties and interpretation of the budget gap indicators," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 112-132, April.
  • Handle: RePEc:rnp:ecopol:ep1623
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    More about this item

    Keywords

    fiscal policy; fiscal stability; public debt;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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