Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235281 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8911
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
The budget dispute between Italy and the European Commission in 2018 gave new impetus for the debate about the reliability of output gap estimation methods and their use for calculating structural budget balances. In this paper we review the main properties of the mainstream approaches and compare their performance with structural budget balances, whose calculation is based on a business survey. Our main result is that while the survey-based measure is highly correlated with the existing structural budget balances which are calculated based on some estimates of the output gap, it is significantly less revised over time and almost unbiased. Moreover, the survey-based measure could be easily implemented into the existing EU fiscal rules without any major changes.
Subjects: 
fiscal rules
cyclical adjustment
output gaps
real time data
JEL: 
E32
E62
H62
H68
Document Type: 
Working Paper
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