How to Measure Public Finance Consolidation

Viktor Novysedlak () and Erik Bugyi ()
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Viktor Novysedlak: Council for Budget Responsibility
Erik Bugyi: Council for Budget Responsibility

Discussion Papers from Council for Budget Responsibility

Abstract: This discussion paper provides an overview of the analytical indicators used to evaluate fiscal policy in the short, medium and long term. It focuses on their clear definition and their advantages/disadvantages, and accentuates the importance of their clear interpretation. In addition to the commonly used indicators, such as the size of measures or change in the structural balance, the paper introduces a new indicator measuring the government’s contribution to the sustainable change in fiscal position (government consolidation effort) in a given year. Despite their numerous advantages, short-term indicators do not necessarily reflect the long-term impacts of various measures. These should primarily be assessed using long-term indicators, such as fiscal gap indicators, or through the net worth concept. Despite the existence of several indicators, each and every one of them has its own raison d’etre in fiscal analyses, because they all provide answers to important analytical questions. They should therefore be treated as mutually complementary. Some of the indicators assume the existence of a no-policy-change scenario, which is an essential element in the evaluation of measures implemented by the government. For this reason, such a scenario must have a detailed structure and all its underlying assumptions should be clearly spelled out.

Keywords: fiscal indicators; no-policy-change scenario; consolidation effort; structural balance; net worth; fiscal gap indicators (search for similar items in EconPapers)
JEL-codes: E62 H11 H62 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2014-05
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:cbe:dpaper:201402

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