This site has been archived on 27/01/17

Navigation path

The website of the Directorate General for Economic and Financial Affairs has moved.

You will find all publications issued after July 2015 on the new web presence.

Adjusting the budget balance for the business cycle: the EU methodology

Author(s): Gilles Mourre, Caterina Astarita and Savina Princen

Adjusting the budget balance for the business cycle: the EU methodologypdf(622 kB) Choose translations of the previous link 

Summary for non-specialistspdf(38 kB) Choose translations of the previous link 

The cyclically-adjusted budget balance (CAB) is the backbone of the EU framework of fiscal surveillance, both in its preventive and corrective arms. The concept corresponds to the budget balance prevailing if the economy was running at potential. After correcting for the one-off and temporary measures, it is called structural budget balance and used to assess the fiscal policy stance. This paper presents the EU methodology for computing the CAB. It derives the new value of the budgetary semi-elasticities following the recent revision of individual revenue and expenditure elasticities by the OECD and shows the effect of the revised elasticities on the CAB.

(European Economy. Economic Papers 536. November 2014. Brussels. PDF. 40pp. Tab. Graph. Ann. Bibliogr. Free.)

KC-AI-14-536-EN-N (online)KC-AI-14-536-EN-C (print)
ISBN 978-92-79-35185-3 (online)ISBN 978-92-79-36151-7 (print)
doi: 10.2765/71756 (online)doi: 10.2765/81338 (print)

JEL classification: E32, E61, H3, H6

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

Additional tools

  • Print version 
  • Decrease text 
  • Increase text