The Structural Budget Balance The IMF’s Methodology

IMF Working Papers, July 1, 1999

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The Structural Budget Balance The IMF’s Methodology

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Bibliographic details

• Authors: Robert P. Hagemann
• Published: July 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451851809.001

Summary

• This paper describes the methodology used by the IMF staff to calculate the structural budget balance, estimates of which are published regularly in the IMF’s World Economic Outlook.
• The structural budget balance is the government’s actual fiscal position purged of the estimated budgetary consequences of the business cycle, and is designed in part to provide an indication of the medium-term orientation of fiscal policy.
• Interpretation of the structural budget balance requires caution in several respects; some of these cautions are reviewed in the paper.
• The paper then considers briefly the potential usefulness of the structural budget balance as a tool for enforcement—under the Stability and Growth Pact—of the European Economic and Monetary Union reference value on the deficit specified in the Maastricht Treaty.

Methodology (as described)

• Focus: IMF staff methodology to calculate the structural budget balance published in the World Economic Outlook.
• Core concept: Purge the government’s actual fiscal position of estimated budgetary consequences of the business cycle to indicate medium-term fiscal orientation.
• Elements referenced in subject/keywords: estimation of a production function, potential output, natural rate of unemployment, production function approach, IMF stair estimate, revenue elasticity, total factor productivity.

Interpretation and Cautions

• The structural budget balance is intended to indicate medium-term fiscal orientation but requires caution in interpretation.
• The paper reviews several specific cautions (details in the full paper).

Use for Policy Enforcement

• The paper briefly considers the potential usefulness of the structural budget balance as a tool for enforcement—under the Stability and Growth Pact—of the European Economic and Monetary Union reference value on the deficit specified in the Maastricht Treaty.

Publication and Metadata

• By Robert P. Hagemann
• July 1, 1999
• Pages: 14
• Volume: 1999
• Issue: 095
• Series: Working Paper No. 1999/095
• Stock No: WPIEA0951999
• DOI: https://doi.org/10.5089/9781451851809.001
• ISBN: 9781451851809
• ISSN: 1018-5941
• Format noted: IMF Working Papers

Source: IMF web landing page for "The Structural Budget Balance The IMF’s Methodology" (IMF Working Papers), accessed content provided.

Content in this bundle

• The Structural Budget Balance The IMF's Methodology - WP/99/95
  • The Structural Budget Balance The IMF's Methodology - WP/99/95 (Markdown version)
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