Structural Balances and All That: Which Indicators to Use in Assessing Fiscal Policy

 
Author/Editor: Chalk, Nigel Andrew
 
Publication Date: June 01, 2002
 
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Summary: Structural indicators of a country's fiscal position are regularly used as estimates of both discretionary changes in fiscal policy and the effect of fiscal policy on aggregate demand. This paper looks at such indicators and evaluates, from a theoretical standpoint and from empirical case studies, their usefulness in measuring the size of discretionary policy action or fiscal demand stimulus. Two propositions are examined in detail: first, that the change in the primary structural balance provides a better indicator of discretionary fiscal policy than does the change in the primary balance; and second, that the change in the structural balance is a good indicator of the demand stimulus arising from changes in the fiscal position. In addition, the paper discusses measurement problems relating to structural balances and the use of the fiscal impulse as an alternative to structural balances.
 
Series: Working Paper No. 02/101
Subject(s): Fiscal policy | Economic models | Japan | Germany

Author's Keyword(s): Structural balances | fiscal stimulus | weighted budget balance
 
English
Publication Date: June 01, 2002
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1012002 Pages: 31
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