The NBB’s Work on Structural or Cyclically-Adjusted Fiscal Indicators

This paper offers a brief overview of the research activities of the National Bank of Belgium with respect to so-called structural or cyclically-adjusted fiscal indicators. In making any form of fiscal assessment, it is essential to have an unbiased measure of the real policy stance. It is therefore necessary to identify all elements which are not directly related to fiscal policy per se but which do affect the public accounts and, preferably, quantify their impact. Instead of using only GDP as a reference as in the traditional methods based upon output gaps, the paper proposes to compute the trends and the cyclical components for a limited number of macroeconomic variables whose impact on public finances is particularly large (e.g. private consumption, employees' gross earnings, operating surplus, employment in the private sector). The cyclical-adjusted balance is then computed adjusting the budget for the effects of those cyclical components. This 'disaggregated' method may be more appropriate than the traditional approaches for economies experiencing large cyclical swings in the composition of GDP