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What determines fiscal balances? An empirical investigation in determinants of changes in OECD budget balances

Author

Listed:
  • Tujula, Mika
  • Wolswijk, Guido

Abstract

Fiscal balances have deteriorated quickly in recent years, bringing back to the foreground the question what factors help explain such sharp changes. This paper takes a broad perspective at the issue regarding countries included, the range of explanatory variables tried, and the time-span. The empirical analysis shows that changes in budget balances are affected by debt growth, macroeconomic developments and political factors. In particular, we find that the run-up to EMU induced additional consolidation in Europe and that budget balances deteriorate markedly in election years. Asset prices also may affect budgets, but the impact remains limited in normal times. JEL Classification: E61, E62, H61, H62

Suggested Citation

  • Tujula, Mika & Wolswijk, Guido, 2004. "What determines fiscal balances? An empirical investigation in determinants of changes in OECD budget balances," Working Paper Series 422, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2004422
    Note: 339133
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp422.pdf
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    More about this item

    Keywords

    Asset Prices; budget balance; economic growth; fiscal policy; Stability and Growth Pact.;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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