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Asset Price Cycles, “One-Off” Factors and Structural Budget Balances

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  • Nathalie Girouard
  • Robert Price

Abstract

This paper analyses two factors which may cause cyclically-adjusted budget balances to give a misleading picture of underlying fiscal trends. It first explores the implications of recent large asset-market related fluctuations in government revenues for the measurement of structural budget balances. And second, it reviews the impact of the increased recourse to stopgap “one-off” measures to control deficits. The results confirm that since the late 1990s revenues have been more buoyant than would have been warranted by the registered rate of nominal output growth and the impact of tax measures. The study suggests that from 1995 to 2000 the average contribution of “unwarranted” revenues to year-to-year changes in cyclically-adjusted budget positions ranged from negligible to around ½ per cent of GDP, the main countries affected being the United States, the United Kingdom, France and some Nordic countries. Conversely, the subsequent decline in tax receipts has been sharper than could ... Cette étude analyse deux facteurs qui peuvent contribuer à brouiller la lisibilité des positions budgétaires sous-jacentes évaluées par la mesure traditionnelle du solde budgétaire corrigé des variations cycliques. Dans un premier temps, elle étudie les implications des récentes fluctuations des recettes fiscals associées aux marchés boursiers sur la mesure du solde structurel. Dans un deuxième temps, cette etude discute des effets du recours accru aux facteurs non-récurrents sur la maîtrise des déficits. Les resultants confirment que depuis la fin des années 1990, les recettes fiscales ont été plus dynamiques que ne le laissaient suggérer le taux de croissance nominal de l’activité et les effets des mesures fiscales. Entre 1995 et 2000, la contribution moyenne des recettes non-expliquées au changement annuel du solde budgétaire corrigée pour les variations cycliques oscillerait entre zéro et ½ pour cent du PIB, les principaux pays concernés étant les États-Unis, le Royaume-Uni, la ...

Suggested Citation

  • Nathalie Girouard & Robert Price, 2004. "Asset Price Cycles, “One-Off” Factors and Structural Budget Balances," OECD Economics Department Working Papers 391, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:391-en
    DOI: 10.1787/305051767827
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    Citations

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    Cited by:

    1. Lane, Philip & ,, 2010. "International Differences in Fiscal Policy During the Global Crisis," CEPR Discussion Papers 8009, C.E.P.R. Discussion Papers.
    2. Isabell Koske & Nigel Pain, 2008. "The Usefulness of Output Gaps for Policy Analysis," OECD Economics Department Working Papers 621, OECD Publishing.
    3. Pilar Poncela & Eva Senra & Daniel Sotelsek & Guido Zack, 2014. "Some New Results on the Estimation of Structural Budget Balance for Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 210(3), pages 11-31, September.
    4. Bénétrix, Agustín S. & Lane, Philip R., 2013. "Fiscal cyclicality and EMU," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 164-176.
    5. Agnello, Luca & Dufrénot, Gilles & Sousa, Ricardo M., 2015. "Nonlinear effects of asset prices on fiscal policy: Evidence from the UK, Italy and Spain," Economic Modelling, Elsevier, vol. 44(C), pages 358-362.
    6. Andersen, Torben M., 2013. "Fiscal policy targeting under imperfect information," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 114-130.
    7. Kremer, Jana & Braz, Cláudia Rodrigues & Brosens, Teunis & Langenus, Geert & Momigliano, Sandro & Spolander, Mikko, 2006. "A disaggregated framework for the analysis of structural developments in public finances," Discussion Paper Series 1: Economic Studies 2006,05, Deutsche Bundesbank.
    8. Altar, Moisa & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating The Cyclically Adjusted Budget Balance For The Romanian Economy. A Robust Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 79-99, July.
    9. Perugini, Cristiano & Žarković Rakić, Jelena & Vladisavljević, Marko, 2016. "Austerity and gender wage inequality in EU countries," MPRA Paper 76306, University Library of Munich, Germany.
    10. Margit Molnar, 2012. "Fiscal Consolidation: Part 5. What Factors Determine the Success of Consolidation Efforts?," OECD Economics Department Working Papers 936, OECD Publishing.
    11. Philip R. Lane, 2011. "External Imbalances and Macroeconomic Policy in New Zealand," The Institute for International Integration Studies Discussion Paper Series iiisdp376, IIIS.
    12. Philip Lane, 2010. "Some Lessons for Fiscal Policy from the Financial Crisis," The Institute for International Integration Studies Discussion Paper Series iiisdp334, IIIS.
    13. Agustín S. Bénétrix & Philip R. Lane, 2012. "The Cyclical Conduct of Irish Fiscal Policy," The World Economy, Wiley Blackwell, vol. 35(10), pages 1277-1290, October.
    14. Roumeen Islam, 2017. "Growth after Crisis in Europe: An Interdependence of Macroeconomic and Structural Policies," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 11(2), pages 19-62, December.
    15. Margit Molnár, 2012. "Fiscal consolidation: What factors determine the success of consolidation efforts?," OECD Journal: Economic Studies, OECD Publishing, vol. 2012(1), pages 123-149.
    16. Agust n S. B n trix & Philip R. Lane, 2015. "Financial Cycles and Fiscal Cycles," Trinity Economics Papers tep0815, Trinity College Dublin, Department of Economics.

    More about this item

    Keywords

    asset prices; fiscal balances; prix des actifs; solde budgétaire; solde budgétaire corrigé des variations cycliques; structural balances;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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