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Cyclically neutral generational accounting

  • Bonin, Holger
  • Patxot, Concepció
  • Souto, Guadalupe

This 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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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-099.

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Date of creation: 2013
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Handle: RePEc:zbw:zewdip:13099
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  1. Concepció Patxot & Elisenda Renteria & Miguel Sánchez Romero & Guadalupe Souto, 2012. "Measuring the balance of government intervention on forward and backward family transfers using NTA estimates: the modified Lee Arrows," MPIDR Working Papers WP-2012-015, Max Planck Institute for Demographic Research, Rostock, Germany.
  2. Holger Bonin & Joan Gil Trasfi & Concepcion Patxot Cardoner, 1999. "Beyond the Toledo agreement: the intergenerational impact of the spanish pension reform," Working Papers in Economics 54, Universitat de Barcelona. Espai de Recerca en Economia.
  3. Fabrizio Balassone & Jorge Cunha & Geert Langenus & Bernhard Manzke & Jeanne Pavot & Doris Prammer & Pietro Tommasino, 2009. "Fiscal sustainability and policy implications for the euro area," Working Paper Research 155, National Bank of Belgium.
  4. Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting around the World," NBER Books, National Bureau of Economic Research, Inc, number auer99-1, 07.
  5. Bonin, Holger & Abio, Gemma & Berenguer, Eduardo & Gil, Joan & Patxot, Concepció, 2001. "Is the Deficit under Control?A Generational Accounting Perspective on Fiscal Policy and Labour Market Trends in Spain," IZA Discussion Papers 306, Institute for the Study of Labor (IZA).
  6. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
  7. Volker Börstinghaus & Georg Hirte, 2001. "Generational Accounting versus Computable General Equilibrium," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(3), pages 227-, July.
  8. Ulrich Benz & Christian Hagist, 2008. "Konjunktur und Generationenbilanz - eine Analyse anhand des HP-Filters," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(4), pages 299-316, August.
  9. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
  10. Rafflhuschen, B. & Risa, A.E., 1997. "Generational Accounting and intergenerational Welfare," Norway; Department of Economics, University of Bergen 164, Department of Economics, University of Bergen.
  11. Alan J. Auerbach, 1997. "Quantifying the Current U.S. Fiscal Imbalance," NBER Working Papers 6119, National Bureau of Economic Research, Inc.
  12. Raffelhuschen, Bernd & Risa, Alf Erling, 1997. " Generational Accounting and Intergenerational Welfare," Public Choice, Springer, vol. 93(1-2), pages 149-63, October.
  13. Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Introduction to "Generational Accounting around the World"," NBER Chapters, in: Generational Accounting around the World, pages 1-8 National Bureau of Economic Research, Inc.
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