Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298165 
Year of Publication: 
2024
Series/Report no.: 
ADB Economics Working Paper Series No. 719
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
This paper reviews the current discussions, methods, and practices surrounding the estimation of reasonable proxies for the underlying fiscal position, a useful anchor for fiscal policy. An empirical application to developing Asian economies is carried out. There is no one-size fits all type of approach and the sensitivity and discernment regarding specific economies are important in various stages. The choice of the filter to decompose trends from cycles matters. The way to adjust revenues and expenditures entering the cyclically adjusted balance also matters-choices regarding economy-specific vs. panel estimations or the use of static vs. time-varying approaches need to be made. To deal with one-off operations, a narrative-based approach can complement the suggested identification based on large changes in cyclically adjusted government capital transfers. A discussion of other important factors that can affect the estimates of structural balances such as asset and commodity prices is also provided.
Subjects: 
budget elasticity
time-varying estimation
trend-cycle decomposition
cyclically adjusted balances
one-off fiscal operations
JEL: 
C33
E62
H30
H60
O53
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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