Fiscal Impulses and their Fiscal Impact

IMF Working Papers, May 1, 1992

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Fiscal Impulses and their Fiscal Impact

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Bibliographic details

• Authors: Sheetal K. Chand
• Published: May 1, 1992
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451977530.001

Summary and main findings

• Fiscal impulse measures are used in the WEO and elsewhere to indicate the changing impact of the budget on the economy.
• Such measures are intended to provide more accurate indications of whether the budget is becoming more or less expansionary than would just observing moments in the actual budget balance.
• The measure has been criticized for lacking an analytical rationale.
• This paper uses a simple framework to show that the fiscal impulse measure can be analytically derived.
• While deriving the measure removes one source of criticism, the measure nevertheless should be used carefully when making inferences of fiscal impact.

Analytical framework and interpretation

• The paper employs a simple analytical framework to derive the fiscal impulse measure.
• Demonstrates that an analytically derived fiscal impulse measure can provide a theoretically grounded indicator of the changing fiscal stance.
• Emphasizes limitations: even when analytically derived, the fiscal impulse measure requires careful interpretation when inferring actual fiscal impact on the economy.

Policy relevance and cautions for use

• Fiscal impulse measures can improve diagnosis of whether fiscal policy is becoming more or less expansionary compared with raw budget-balance observations.
• Users should be cautious when making inferences of fiscal impact from the fiscal impulse measure despite its analytical derivation.
• Applicable topics and policy areas include: Budget planning and preparation; Consumption; Expenditure; Fiscal policy; Macro-fiscal analysis; National accounts; Public financial management (PFM).

Publication and metadata

• Author: Sheetal K. Chand
• Date: May 1, 1992
• Series: Working Paper No. 1992/038
• Issue: 038
• Volume: 1992
• Pages: 18
• DOI: https://doi.org/10.5089/9781451977530.001
• Stock No: WPIEA0381992
• ISBN: 9781451977530
• ISSN: 1018-5941
• Subjects and keywords: Budget planning and preparation, Consumption, Expenditure, Fiscal policy, Macro-fiscal analysis, National accounts, Public financial management (PFM); aggregate demand, aggregate demand impact, Consumption, consumption function, deficit measure, effect of the budget, government expenditure, government expenditures g, impulse measure, inflation-adjusted deficit, output effect, pump priming, real rate of interest, revenue effect, revenue response, WP

IMF Working Paper — Sheetal K. Chand, "Fiscal Impulses and their Fiscal Impact", 1992/038 (May 1, 1992), DOI: https://doi.org/10.5089/9781451977530.001