{
  "title": "Correcting “Beyond the Cycle\": Accounting for Asset Prices in Structural Fiscal Balances",
  "publication": "IMF Working Papers, May 19, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/correcting-beyond-the-cycle-accounting-for-asset-prices-in-structural-fiscal-balances-42946",
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  "summary": "This paper outlines an operational approach for incorporating the impact of asset price cycles in the calculation of structural fiscal balances (SFBs). The global financial crisis demonstrated that movements in asset prices can have an important fiscal impact.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Outlines an operational approach for incorporating the impact of asset price cycles in the calculation of structural fiscal balances (SFBs).\n- Motivating observation: Movements in asset prices can have an important fiscal impact, as highlighted by the global financial crisis.\n- Core risk: Failing to account for asset price cycles can encourage a pro-cyclical policy stance if temporarily high revenues are passed through into expenditures and can lead to inadequate fiscal buffers when cyclical revenues dissipate.\n- The paper proposes an empirical correction for asset prices and provides illustrative country results for selected OECD countries."
    },
    {
      "heading": "Key findings",
      "content": "- Asset price cycles are imperfectly synchronized with the business cycle.\n- Asset price cycles are quantitatively significant in the sample.\n- The average pre-crisis fiscal impact of asset price cycles ranges from about ½ to 2 percent of GDP.\n- For a number of countries, the pre-crisis fiscal impact of high asset prices was larger at about 4 percent of GDP."
    },
    {
      "heading": "Methodological approach",
      "content": "- Proposes an empirical approach to correct structural fiscal balances for the effects of asset price cycles.\n- Provides illustrative country-level results for selected OECD countries (empirical implementation and country illustrations described in the paper)."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Incorporate asset price cycle adjustments into SFB calculations to avoid overstating structural fiscal positions.\n- Avoid passing temporary, asset-price-driven revenue gains directly into permanent spending commitments to reduce pro-cyclicality.\n- Build adequate fiscal buffers recognizing that cyclical asset-price-related revenues can dissipate, exposing budgets to downside risks."
    },
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      "heading": "Illustrative results and scope",
      "content": "- Country illustrations show materially significant pre-crisis impacts of asset price cycles on fiscal balances.\n- Quantitative impacts reported include ranges and peak country-level values (see findings: ½ to 2 percent of GDP on average; up to about 4 percent of GDP for several countries).\n\nAuthors: Estelle X Liu, Todd D. Mattina, Tigran Poghosyan; May 19, 2015 — Correcting “Beyond the Cycle\": Accounting for Asset Prices in Structural Fiscal Balances (IMF Working Paper No. 2015/109).\n\n---\n\n Content in this bundle\n\n- wp15109\n  - wp15109 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp15109 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/correcting-beyond-the-cycle-accounting-for-asset-prices-in-structural-fiscal-balances-42946"
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    "Authors: Miss Estelle X Liu, Todd D. Mattina, Tigran Poghosyan",
    "Published: May 19, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513520551.001",
    "Outlines an operational approach for incorporating the impact of asset price cycles in the calculation of structural fiscal balances (SFBs).",
    "Motivating observation: Movements in asset prices can have an important fiscal impact, as highlighted by the global financial crisis.",
    "Core risk: Failing to account for asset price cycles can encourage a pro-cyclical policy stance if temporarily high revenues are passed through into expenditures and can lead to inadequate fiscal buffers when cyclical revenues dissipate.",
    "The paper proposes an empirical correction for asset prices and provides illustrative country results for selected OECD countries.",
    "Asset price cycles are imperfectly synchronized with the business cycle.",
    "Asset price cycles are quantitatively significant in the sample.",
    "The average pre-crisis fiscal impact of asset price cycles ranges from about ½ to 2 percent of GDP.",
    "For a number of countries, the pre-crisis fiscal impact of high asset prices was larger at about 4 percent of GDP.",
    "Proposes an empirical approach to correct structural fiscal balances for the effects of asset price cycles.",
    "Provides illustrative country-level results for selected OECD countries (empirical implementation and country illustrations described in the paper).",
    "Incorporate asset price cycle adjustments into SFB calculations to avoid overstating structural fiscal positions.",
    "Avoid passing temporary, asset-price-driven revenue gains directly into permanent spending commitments to reduce pro-cyclicality.",
    "Build adequate fiscal buffers recognizing that cyclical asset-price-related revenues can dissipate, exposing budgets to downside risks.",
    "Country illustrations show materially significant pre-crisis impacts of asset price cycles on fiscal balances.",
    "Quantitative impacts reported include ranges and peak country-level values (see findings: ½ to 2 percent of GDP on average; up to about 4 percent of GDP for several countries).",
    "**_wp15109**"
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