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Measuring the fiscal stance

Wickens, Michael and Polito, Vito 2007. Measuring the fiscal stance. [Discussion Paper]. Discussion Papers in Economics, vol. 14. York: University of York. Available at: http://ideas.repec.org/p/yor/yorken/07-14.html

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Abstract

In this paper we propose an index of the fiscal stance suitable for practical use in short-term policy making. The index is based on a comparison of a target level of the debt-GDP ratio for a given finite horizon with a forecast of the debt-GDP ratio based on a VAR formed from the government budget constraint. This approach to measuring the fiscal stance is different from the literature on fiscal sustainability. We emphasise the importance of having a forward-looking measure of the fiscal stance for the immediate future rather than a test for fiscal sustainability that is backward-looking, or based just on past behaviour which may not be closely related to the current fiscal position. We use our methodology to construct a time series of the indices of the fiscal stances of the US, the UK and Germany over the last 25 or more years. We find that both the US and UK fiscal stances have deteriorated considerably since 2000 and Germany's has been steadily deteriorating since unification in 1989, and worsened again on joining EMU.

Item Type: Monograph (Discussion Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
J Political Science > JC Political theory
J Political Science > JK Political institutions (United States)
J Political Science > JN Political institutions (Europe)
J Political Science > JN Political institutions (Europe) > JN101 Great Britain
Uncontrolled Keywords: Budget deficits; government debt; fiscal sustainability; VAR analysis
Publisher: University of York
Related URLs:
Last Modified: 04 Jun 2017 04:54
URI: http://orca-mwe.cf.ac.uk/id/eprint/46332

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