Early Warning or Just Wise After the Event?

Andrew Hughes Hallet, Rasmus Kattai () and John Lewis
Authors registered in the RePEc Author Service: Andrew Hughes Hallett ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: The effectiveness of cyclically adjusted balances (CABs) as an indicator of the health of public finances depends on the accuracy with which cyclically adjusted figures can be calculated in real time. This paper measures the accuracy of such figures using a specially constructed real time dataset containing published values of deficits, output gaps and cyclically adjusted deficits from successive issues of OECD economic outlook. We find that data revisions are so great that real time CABs have low power in detecting fiscal slippages as defined by the ex post data. We find that the around half of the real time errors in CABs can be attributed to revisions in the cyclical component of the budget balance, and around one half to revisions in the deficit to GDP ratio across vintages.

New Economics Papers: this item is included in nep-mac
Date: 2007-01
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Persistent link: http://EconPapers.repec.org/RePEc:dnb:dnbwpp:124

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