Real-time analysis of the revisions to the structural position of public finances

Pablo Burriel (), Víctor González-Díez (), Jorge Martínez-Pagés () and Enrique Moral-Benito
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Víctor González-Díez: Banco de España
Jorge Martínez-Pagés: Banco de España

No 2108, Occasional Papers from Banco de España

Abstract: Estimating the role of the business cycle on the General Government budget balance plays a key role on the real-time analysis of fiscal policy, especially under the Stability and Growth Pact framework. This paper studies, for a group of EU countries and the United Kingdom, the revisions in the structural balance estimated by the European Commission between its first publication and the most recent figures. The results suggest that revisions were negative (i.e. the budget balance measured ex-post is, on average, less favourable than assessed in real time) and significant for the period prior to 2008, but relatively smaller for later years. Overall, revisions are procyclical but negative on average. Furthermore, data revisions (on public expenditure and revenues as well as GDP growth) are as important as errors in estimating the unobservable potential GDP. According to these findings, the structural efforts required by the EU framework were in general insufficient during the boom up to 2008, since they were based on too optimistic estimates of the structural balances. However, there is no evidence of similar real-time errors in the assessment of fiscal positions during the crisis and the posterior recovery.

Keywords: public accounts; business cycle; real-time revisions (search for similar items in EconPapers)
JEL-codes: E32 H68 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-03
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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