Cyclically Adjusted Budget Balances: An Alternative Approach

By Carine Bouthevillain, Philippine Cour-Thimann, Gerrit van den Dool, Pablo Hernández de Cos, G. Langenus, Matthias F. Mohr, Sandro Momigliano, Mika Tujula. Social Science Research Network, 2001

251 citations recorded by the source corpus.

Estimates of cyclically-adjusted budget balances, correcting actual government budget balances for business cycle fluctuations, are produced by many institutions. This paper presents an alternative approach for the cyclical adjustment of budget balances. The approach is based on a disaggregated method for the calculation of the cyclical component of the budget balance. In this approach, the effects of changes in theA structure of demand and national income on government revenue and expenditure are captured. Cases where the various macroeconomic bases are in different phases of the cycle or exhibit fluctuations of different magnitude are taken into account in this way. The computation of the cyclical components of these macroeconomic bases is based on the Hodrick-Prescott filter and takes into account the latest evidence presented in the literature about the properties of this filter. The paper also presents new estimates of the elasticities of individual budget items with respect to the relevant macroeconomic variables.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b4a4e549bca7bdebf28f4b61d7063e67faf42da0

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Citations in the corpus

The economic effects of fiscal policy: The case of Spain (2008, background): “Hence, these have been taken from Van den Noord (2000) and Bouthevillain et al. (2001). The output elasticities of the relevant tax bases were, however, obtained from econometric estimation on a quarterly basis.”
Fi S cal F oreca S ting le SS on S F rom the literature an D challenge S 1 (2007, unknown): “Budgetary elasticities are normally estimated with econometric regressions (Bouthevillain et al., 2001, van den Noord, 2000), derived from tax or expenditure laws and from detailed information on the distribution of income and revenue (Mendoza et al, 1994), or by simulating macro econometric models…”
The Economic Effects of Exogenous Fiscal Shocks in Spain: A SVAR Approach (2006, unknown): “Hence, these have been taken from Van den Noord (2000) and Bouthevillain et al. (2001).”
Targeting the Structural Balance (2007, unknown): “5 percentage points (van den Noord, 2000; Bouthevillain et al., 2001; IMF, 2005a), this result suggests that discretionary policy has been used procyclically in developed countries as well. A related finding is that fiscal policy is asymmetric over the business cycle and that this is especially the ”
Budgetary Forecasts in Europe - the Track Record of Stability and Convergence Programmes (2004, methodology): “In line with the literature on European business cycles, we use 8 years to compute this measure (see Bouthevillain et al., 2001).”
A Time Varying Natural Rate of Interest for the Euro Area (2007, background): “Bouthevillain et al. (2001) show that this value entails signi cant bene ts in terms of less leakage e¤ects (which is a ltering error corresponding to the overestimation of the variability of the cyclical component) compared to the costs related to the increase in compression e¤ects (which is the…”