Some Considerations Regarding the Calculation of Cyclically Adjusted Public Balances

Hernandez de Cos points out that changes in the structure of public sector, which were particularly large in Spain since the late seventies, could lead to significant errors in estimates of elasticities calculated on long reference periods; if only annual data are available this may greatly hinder econometric analysis. He also stresses the need to re-estimate the elasticities whenever there is a significant change in the law, especially when it is intended to analyse future cyclically-adjusted deficits