Early warning or just wise after the event? The problem of using cyclically adjusted budget deficits for fiscal surveillance

Andrew Hughes Hallett (), Rasmus Kattai () and John Lewis

No 2007-02, Bank of Estonia Working Papers from Bank of Estonia

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.

Keywords: fiscal surveillance; cyclically adjusted budget balance; real time data (search for similar items in EconPapers)
JEL-codes: H62 H68 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2007-02-09, Revised 2007-02-09
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Working Paper: Early Warning or Just Wise After the Event? The Problem of Using Cyclically Adjusted Budget Deficits for Fiscal Surveillance (2007)
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