How cyclical do cyclically-adjusted balances remain ? an EU study Enrique Alberola, José González Mínguez, Pablo Hernández de Cos, José M. Marqués
By: Alberola Ila, Enrique
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Contributor(s): González Mínguez, José Manuel | Hernández de Cos, Pablo | Marqués Sevillano, José Manuel.
Material type: 
ArticlePublisher: 2003Subject(s): PRESUPUESTOS | POLITICA FISCAL | UNION EUROPEA
In:
Hacienda Pública Española nº 166, p. 151-181Summary: Observed budget balances are an imperfect indicator the fiscal stance, because fluctuations in economic activity induce automatic changes in the balance, hence the use of cyclically - adjusted balances (CAB). However, this paper shows that CABs (as measured through one of the two methods currently used bythe Commision) tend to be systematically overstimated during downturns and underestimated during expansion. The dominant source of this distortion arises from the filtering of revenues deemed to be cyclical, possibly signalling a problem with the computation of elasticities. The effect of the items which are assumed not to move with the cycle is non significant, but this overall result conceals offseting effects: public investment to be significantly procyclical and interestpayments and transfers to firms are countercyclical.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| IEF | HPE/2003/166-6 (Browse shelf) | Available | HPE/2003/166-6 |
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Resumen. Conclusiones. Bibliografía
Observed budget balances are an imperfect indicator the fiscal stance, because fluctuations in economic activity induce automatic changes in the balance, hence the use of cyclically - adjusted balances (CAB). However, this paper shows that CABs (as measured through one of the two methods currently used bythe Commision) tend to be systematically overstimated during downturns and underestimated during expansion. The dominant source of this distortion arises from the filtering of revenues deemed to be cyclical, possibly signalling a problem with the computation of elasticities. The effect of the items which are assumed not to move with the cycle is non significant, but this overall result conceals offseting effects: public investment to be significantly procyclical and interestpayments and transfers to firms are countercyclical.
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