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Konjunkturinstitutet - National Institute of Economic Research Working Papers, Konjunkturinstitutet - National Institute of Economic Research

No 90:
A New Method for Constructing a Cyclically Adjusted Budget Balance: the Case of Sweden

Henrik Braconier and Tomas Forsfält ()

Abstract: In this paper, we discuss a new method for constructing a cyclically adjusted budget balance. We use the method to evaluate the budget balance for Sweden during the period 1991–2005. Traditionally, methods for cyclical adjustment have focused on the output gap. In this paper we also adjust for deviations of tax bases from their trend levels. Furthermore, we adjust for effects of the unemployment gap on government spending. For Sweden, we find that these additional adjustments have a significant impact on the cyclically adjusted budget balance, especially for the periods 1992–1995 and 2000–2001.

Keywords: Fiscal Policy; Cyclically Adjusted Budget Balance; (follow links to similar papers)

JEL-Codes: H30; H61; (follow links to similar papers)

19 pages, April 15, 2004

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