[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/euf/dispap/098.html
   My bibliography  Save this paper

The Semi-Elasticities Underlying the Cyclically-Adjusted Budget Balance: An Update and Further Analysis

Author

Listed:
  • Gilles Mourre
  • Aurélien Poissonnier
  • Martin Lausegger
Abstract
We update the semi-elasticities of the budget balance to output for the 28 EU Member States using new weights based on ESA2010 data (with unchanged elasticities for individual fiscal items). The revisions of the semi-elasticities are fairly small across Member States and leave the assessment of fiscal developments in the EU broadly unchanged. The revision of the Cyclically Adjusted Balance (CAB) is mainly driven by that in the headline balance and the estimated output gap, not by the update of the fiscal semi-elasticities. A sensitivity analysis shows that revenue and expenditure weights, if allowed to vary over time, can have a larger impact on the semi-elasticities than the present update would suggest, although this would affect the CAB only marginally. Based on the existing four vintages of the estimated semi-elasticities, exploratory panel data analysis confirms that semi-elasticities are country-specific structural parameters, mostly of fiscal nature: they are linked to the size of government, the share of unemployment-related spending, the share of non-tax revenue and tax progressivity. They can also be influenced by the belonging to specific country groupings and an emulation effect between neighbours.

Suggested Citation

  • Gilles Mourre & Aurélien Poissonnier & Martin Lausegger, 2019. "The Semi-Elasticities Underlying the Cyclically-Adjusted Budget Balance: An Update and Further Analysis," European Economy - Discussion Papers 098, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:098
    as

    Download full text from publisher

    File URL: https://economy-finance.ec.europa.eu/publications/semi-elasticities-underlying-cyclically-adjusted-budget-balance-update-and-further-analysis_en
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gilles Mourre & Savina Princen, 2015. "Tax Revenue Elasticities Corrected for Policy Changes in the EU," European Economy - Discussion Papers 018, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Morris, Richard & Schuknecht, Ludger, 2007. "Structural balances and revenue windfalls: the role of asset prices revisited," Working Paper Series 737, European Central Bank.
    3. Gilles Mourre & Aurélien Poissonnier, 2019. "What Drives the Responsiveness of the Budget Balance to the Business Cycle in EU Countries?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(4), pages 237-249, July.
    4. Koester, Gerrit & Priesmeier, Christoph, 2017. "Revenue elasticities in euro area countries," Working Paper Series 1989, European Central Bank.
    5. Kieran Mc Morrow & Rafal Raciborski & Werner Roeger & Valerie Vandermeulen, 2015. "An assessment of the relative quality of the EU output gap estimates," Quarterly Report on the Euro Area (QREA), Directorate General Economic and Financial Affairs (DG ECFIN), European Commission, vol. 14(3), pages 19-28, October.
    6. Morris, Richard & de Castro Fernández, Francisco & Jonk, Steven & Kremer, Jana & Linehan, Suzanne & Marino, Maria Rosaria & Schalck, Christophe & Tkačevs, Olegs, 2009. "Explaining government revenue windfalls and shortfalls: an analysis for selected EU countries," Working Paper Series 1114, European Central Bank.
    7. Karel Havik & Kieran Mc Morrow & Fabrice Orlandi & Christophe Planas & Rafal Raciborski & Werner Roeger & Alessandro Rossi & Anna Thum-Thysen & Valerie Vandermeulen, 2014. "The Production Function Methodology for Calculating Potential Growth Rates & Output Gaps," European Economy - Economic Papers 2008 - 2015 535, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Robert Price & Thai-Thanh Dang & Yvan Guillemette, 2014. "New Tax and Expenditure Elasticity Estimates for EU Budget Surveillance," OECD Economics Department Working Papers 1174, OECD Publishing.
    9. Gilles Mourre & George-Marian Isbasoiu & Dario Paternoster & Matteo Salto, 2013. "The cyclically-adjusted budget balance used in the EU fiscal framework: an update," European Economy - Economic Papers 2008 - 2015 478, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    10. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
    11. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
    12. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
    13. Vito Tanzi & Mario I. Blejer & Mario O. Teijeiro, 1987. "Inflation and the Measurement of Fiscal Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 34(4), pages 711-738, December.
    14. K. Mc Morrow & W. Roeger & V. Vandermeulen & K. Havik, 2015. "An assessment of the relative quality of the Output Gap estimates produced by the EU's Production Function Methodology," European Economy - Discussion Papers 020, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    15. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
    16. Mr. Julio Escolano, 2010. "A Practical Guide to Public Debt Dynamics, Fiscal Sustainability, and Cyclical Adjustment of Budgetary Aggregates," IMF Technical Notes and Manuals 2010/002, International Monetary Fund.
    17. Perotti, Roberto, 2005. "Estimating the Effects of Fiscal Policy in OECD Countries," CEPR Discussion Papers 4842, C.E.P.R. Discussion Papers.
    18. Savina Princen & Gilles Mourre & Dario Paternoster & George-Marian Isbasoiu, 2013. "Discretionary tax measures: pattern and impact on tax elasticities," European Economy - Economic Papers 2008 - 2015 499, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    19. Francesca D'Auria & Cécile Denis & Karel Havik & Kieran Mc Morrow & Christophe Planas & Rafal Raciborski & Werner Roger & Alessandro Rossi, 2010. "The production function methodology for calculating potential growth rates and output gaps," European Economy - Economic Papers 2008 - 2015 420, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    20. Gilles Mourre & Caterina Astarita & Anamaria Maftei, 2016. "Measuring the Uncertainty in Predicting Public Revenue," European Economy - Discussion Papers 039, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    21. Robert Price & Thai-Thanh Dang & Jarmila Botev, 2015. "Adjusting fiscal balances for the business cycle: New tax and expenditure elasticity estimates for OECD countries," OECD Economics Department Working Papers 1275, OECD Publishing.
    22. Gilles Mourre & Caterina Astarita & Savina Princen, 2014. "Adjusting the budget balance for the business cycle: the EU methodology," European Economy - Economic Papers 2008 - 2015 536, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    23. Vincent Belinga & Ms. Dora Benedek & Ruud A. de Mooij & Mr. John Norregaard, 2014. "Tax Buoyancy in OECD Countries," IMF Working Papers 2014/110, International Monetary Fund.
    24. Julio Escolano, 2010. "A Practical Guide to Public Debt Dynamics, Fiscal Sustainability, and Cyclical Adjustment of Budgetary Aggregates," IMF Technical Notes and Manuals 10/02, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gilles Mourre & Aurélien Poissonnier, 2019. "What Drives the Responsiveness of the Budget Balance to the Business Cycle in EU Countries?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(4), pages 237-249, July.
    2. Stefan Schiman-Vukan, 2022. "Langfristige Perspektiven der öffentlichen Finanzen in Österreich," WIFO Studies, WIFO, number 70395.
    3. Aleksandr Arsenev & Philipp Heimberger & Bernhard Schütz, 2024. "Das konjunkturelle Verhalten der Staatsausgaben für Gesundheit und Soziales in Österreich und Deutschland: Wie robust ist die OECD-Methodik?," wiiw Research Reports in German language 25, The Vienna Institute for International Economic Studies, wiiw.
    4. Hristov, Nikolay & Hülsewig, Oliver & Kolb, Benedikt, 2024. "Macroprudential capital regulation and fiscal balances in the euro area," Journal of International Money and Finance, Elsevier, vol. 143(C).
    5. Philipp Mohl & Gilles Mourre & Klara Stovicek, 2019. "Automatic Fiscal Stabilisers in the EU: Size and Effectiveness," European Economy - Economic Briefs 045, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Philipp Heimberger, 2022. "The Cyclical Behaviour of Fiscal Policy During the Covid-19 Crisis," wiiw Working Papers 220, The Vienna Institute for International Economic Studies, wiiw.
    7. Kaplanoglou, Georgia, 2022. "Consumption inequality and poverty in Greece: Evidence and lessons from a decade-long crisis," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 244-261.
    8. Manuel Díaz & Carmen Marín & Diego Martínez, 2023. "Determining factors and future scenarios for the Spanish public debt," Studies on the Spanish Economy eee2023-17, FEDEA.
    9. Marcell Göttert & Timo Wollmershäuser, 2021. "Survey-Based Structural Budget Balances," CESifo Working Paper Series 8911, CESifo.
    10. Nicolas End, 2020. "Rousseau's social contract or Machiavelli's virtue? A measure of fiscal credibility," Working Papers halshs-03078704, HAL.
    11. Gábor P. Kiss, 2020. "Aggregate Fiscal Stabilisation Policy: Panacea or Scapegoat?," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 19(2), pages 55-87.
    12. Frane Banić & Ivan Žilić, 2024. "How DiD EU’s fiscal policymakers behave under the Excessive Deficit Procedure," Working Papers 74, The Croatian National Bank, Croatia.
    13. Dénes Kucsera & Hanno Lorenz & Wolfgang Nagl, 2022. "Die Entwicklung der Mittelschicht in Österreich und Deutschland [The Development of the Middle Class in Austria and Germany]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(10), pages 789-794, October.
    14. Philipp Heimberger & Bernhard Schütz, 2022. "Die Budgetsemielastizität und ihre Auswirkungen auf Verschuldungsspielräume im Rahmen der Schuldenbremse [Budget Semi-Elasticity and its Impact on Debt Flexibility in the Context of the Debt Brake]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 102(11), pages 834-837, November.
    15. Heimberger, Philipp, 2023. "This time truly is different: The cyclical behaviour of fiscal policy during the Covid-19 crisis," Journal of Macroeconomics, Elsevier, vol. 76(C).
    16. Philipp Heimberger & Bernhard Schütz, 2022. "Evaluierung des Zusammenhangs von Produktionspotenzial und Budgetsemielastizität im Rahmen der deutschen Schuldenbremse," wiiw Research Reports in German language 22, The Vienna Institute for International Economic Studies, wiiw.
    17. Cláudia Braz & Maria Manuel Campos, 2021. "Challenges in measuring fiscal effects," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    18. Bachleitner, Alena & Prammer, Doris, 2024. "Don’t blame the government!? An assessment of debt forecast errors with a view to the EU Economic Governance Review," European Journal of Political Economy, Elsevier, vol. 82(C).
    19. Sven Langedijk & Aurélien Poissonnier & Edouard Turkisch, 2023. "The impact of macroeconomic developments and imbalances on fiscal outcomes," SN Business & Economics, Springer, vol. 3(6), pages 1-29, June.
    20. Doris Prammer, 2021. "Unprecedented fiscal (re)actions to ease the impact of the COVID-19 pandemic in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/20-Q1/, pages 153-173.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gilles Mourre & Savina Princen, 2015. "Tax Revenue Elasticities Corrected for Policy Changes in the EU," European Economy - Discussion Papers 018, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Koester, Gerrit & Priesmeier, Christoph, 2017. "Revenue elasticities in euro area countries," Working Paper Series 1989, European Central Bank.
    3. Bernd Hayo & Sascha Mierzwa & Umut Unal, 2021. "Estimating Policy-Corrected Long-Term and Short-Term Tax Elasticities for the United States, Germany, and the United Kingdom," MAGKS Papers on Economics 202112, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Marcell Göttert & Timo Wollmershäuser, 2021. "Survey-Based Structural Budget Balances," CESifo Working Paper Series 8911, CESifo.
    5. Klaus Vondra, 2013. "Austria Withstands Recession: Return to Positive Growth in Early 2013," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 6-11.
    6. Vugar Ahmadov & Ulvi Sarkarli & Ramiz Rahmanov, 2017. "Structural Budget Balances in Oil-rich Countries: The Cases of Azerbaijan, Kazakhstan, and Russia," Working Papers 1704, Central Bank of Azerbaijan Republic.
    7. Bernd Hayo & Sascha Mierzwa & Umut Ünal, 2023. "Estimating policy-corrected long-term and short-term tax elasticities for the USA, Germany, and the United Kingdom," Empirical Economics, Springer, vol. 64(1), pages 465-504, January.
    8. Leon Bettendorf & Duncan van Limbergen, 2013. "The stability of tax elasticities in The Netherlands," CPB Discussion Paper 256.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Nicolas Carnot & Francisco de Castro, 2015. "The Discretionary Fiscal Effort: An Assessment of Fiscal Policy and Its Output Effect," Hacienda Pública Española / Review of Public Economics, IEF, vol. 215(4), pages 63-94, December.
    10. Dumitru, Ionut & Stanca, Razvan, 2010. "Fiscal discipline and economic growth – the case of Romania," MPRA Paper 27300, University Library of Munich, Germany.
    11. Heinz Gebhardt & Lars-H. R. Siemers, 2018. "Zur strukturellen Finanzlage der Länder: eine aktuelle Auswertung und Methodenkritik," Volkswirtschaftliche Diskussionsbeiträge 188-18, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    12. Masten, Igor & Grdović Gnip, Ana, 2016. "Stress testing the EU fiscal framework," Journal of Financial Stability, Elsevier, vol. 26(C), pages 276-293.
    13. Pilar Poncela & Eva Senra & Daniel Sotelsek & Guido Zack, 2014. "Some New Results on the Estimation of Structural Budget Balance for Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 210(3), pages 11-31, September.
    14. Gebhardt, Heinz, 2016. "Haushaltskonsolidierung in den meisten Bundesländern weit vorangeschritten," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 67(4), pages 33-48.
    15. Siemers Lars-H. & Gebhardt Heinz, 2020. "Die strukturelle Besserung der Länderfinanzen in der Niedrigzinsphase: die trügerische Leichtigkeit des Scheins," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 21(1), pages 54-78, April.
    16. Cláudia Duarte & José R. Maria & Sharmin Sazedj, 2021. "Cyclical outputs and structural budget balances," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    17. Kuang, Pei & Mitra, Kaushik, 2016. "Long-run growth uncertainty," Journal of Monetary Economics, Elsevier, vol. 79(C), pages 67-80.
    18. Orsola Costantini, 2015. "The Cyclically Adjusted Budget: History and Exegesis of a Fateful Estimate," Working Papers Series 24, Institute for New Economic Thinking.
    19. Achim Truger, 2014. "Austerity, cyclical adjustment and the remaining leeway for expansionary fiscal policies in the Euro area," IMK Working Paper 140-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    20. Mertens, Karel & Ravn, Morten O., 2014. "A reconciliation of SVAR and narrative estimates of tax multipliers," Journal of Monetary Economics, Elsevier, vol. 68(S), pages 1-19.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:euf:dispap:098. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ECFIN INFO (email available below). General contact details of provider: https://edirc.repec.org/data/dg2ecbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.