Structural Fiscal Balances
Last Updated: June 18, 2012
Adjustment of fiscal balances for the output cycle is crucial for assessing fiscal sustainability. Other temporary factors may also affect fiscal balances, concealing the underlying fiscal position. Correcting for a broad set of transitory factors such as commodity shocks; housing, stock, and other asset price cycles; output composition and absorption effects; and one-off factors could provide a more accurate view of the underlying fiscal position.
No single method for adjusting fiscal balances exists, as the appropriate adjustment needs to take several country-specific factors into account, including data availability, the fiscal regime, and the economic structure of the country. With this website we aim at providing information about various approaches for estimating structural fiscal balances, including an excel-based tool and a technical guidance note, important papers from a growing literature on the topic and examples of studies that applied these methods. Issues covered range from choosing the right approach suitable for a specific country, to estimating revenue and expenditure elasticities and measuring the output gap and deviations from the “normal” asset or commodity price level.
The objective is to update this site periodically. We would very much appreciate your feedback, which will allow us to continue refining our methods. We would be happy to respond to any questions on the material provided here.
Technical Note and Template
- "When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances", Technical Notes and Manuals No. 11/02, April 2011
- Template to Compute Cyclically Adjusted and Structural Fiscal Balances, (zip file size 356 kb)
General Guidance Notes
- Escolano, Julio, 2010, “A Practical Guide to Public Debt Dynamics, Fiscal Sustainability, and Cyclical Adjustment of Budgetary Aggregates,” IMF Technical Note and Manuals 10/02
- Fedelino, Annalisa, Mark Horton, and Anna Ivanova, 2009, “Computing Cyclically Adjusted Balances and Automatic Stabilizers,” IMF Technical Note and Manuals 09/05
- Bouthevillain, Carine, Philippine Cour-Thimann, Gerrit van den Dool, Pablo Hernandez de Cos, Geert Langenus, Matthias Mohr, Sandro Momigliano, and Mika Tujula, 2001, "Cyclically adjusted Budget Balances: An Alternative Approach," ECB Working Paper No. 77
- Girouard, Nathalie, and Christophe André, 2005, “Measuring Cyclically Adjusted Budget Balances for OECD Countries,” OECD Economics Department, Working Paper No. 434 (Paris: OECD)
- LarchMartin, and Alessandro Turrini, 2009, “The Cyclically adjusted Budget Balance in EU Fiscal Policy Making: A Love at First Sight Turned into a Mature Relationship,” European Commission Policy Paper 374 (Brussels: European Commission)
Working Papers Using the Template
Adjustment for Asset Price Effects
- Girouard, Nathalie, and Robert Price, 2004, “Asset Price Cycles, “One-Off” Factors and Structural Budget Balances,” OECD Economics Department, Working Paper No. 391 (Paris: OECD).
- Morris, Richard, and Ludger Schuknecht, 2007, “Structural balances and revenue windfalls - the role of asset prices revisited,” ECB Working Paper 737 (Frankfurt: European Central Bank).
- Price, Robert, and Thai-Thanh Dang, 2011, "Adjusting Fiscal balances for Asset Price Cycles" OECD Economics Department, Working Paper No. 868 (Paris:OECD)
Adjustment for Terms-of-Trade and Commodity Price Effects
- Turner, David, 2006, “Should Measures of Fiscal Stance be Adjusted for Terms of Trade Effects?” OECD Economics Department, Working Paper, No. 519 (Paris: OECD)
- Daude, Christian, Ángel Melguizo, and Alejandro Neut, 2010, "Fiscal Policy in Latin America: Countercyclical and Sustainable at Last?, OECD Development Centre Working Paper No 291 (Paris: OECD)
- Villafuerte, Mauricio, and Pablo Lopez-Murphy, 2010, “Fiscal Policy in Oil Producing Countries During the Recent Oil Price Cycle,” IMF Working Paper No. 10/28, (Washington: International Monetary Fund).
- Vladkova-Hollar, Ivanna, and Jeromin Zettelmeyer, 2008, "Fiscal Positions in Latin America: Have They Really Improved?," IMF Working Paper 08/137
Adjustment for One-off Fiscal Operations
- Joumard, Isabelle, Makoto Minegishi, Christophe André, Chantal Nicq, and Robert Price, 2008, “Accounting for One-off Operations when Assessing Underlying Fiscal Positions,” OECD Economic Department, Working Paper No. 642 (Paris: OECD).
- Koen, Vincent, and Paul van den Noord, 2005, “Fiscal Gimmickry in Europe: One-off Measures and Creative Accounting,” OECD Economics Department, Working Paper, No. 417 (Paris: OECD).