Adjusting the budget balance for the business cycle: the EU methodology

Gilles Mourre, Caterina Astarita and Savina Princen

No 536, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The cyclically-adjusted budget balance (CAB) is the backbone of the EU framework of fiscal surveillance, both in its preventive and corrective arms. The concept corresponds to the budget balance prevailing if the economy was running at potential. After correcting for the one-off and temporary measures, it is called structural budget balance and used to assess the fiscal policy stance. This paper presents the EU methodology for computing the CAB. It derives the new value of the budgetary semi-elasticities following the recent revision of individual revenue and expenditure elasticities by the OECD and shows the effect of the revised elasticities on the CAB.

JEL-codes: E32 E61 H3 H6 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014-11
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (78)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0536

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