The Cyclically Adjusted Budget Balance in EU Fiscal Policymaking. Love at First Sight Turned into a Mature Relationship

Larch, Martin and Turrini, Alessandro (2009): The Cyclically Adjusted Budget Balance in EU Fiscal Policymaking. Love at First Sight Turned into a Mature Relationship. Published in: Intereconomics , Vol. 45, No. 1 : pp. 48-60.

Abstract

The cyclically adjusted budget balance (CAB) plays a key role in the EU fi scal surveillance framework. It started off in a supporting role in the shadow of the headline defi cit and, before long, turned into the linchpin of the rules of the Stability and Growth Pact. The steep ascent was driven by high expectations which, with the passing of time, were only partly met. The everyday practice of the EU fi scal surveillance rapidly revealed a number of caveats of the CAB which, at times, hampered the effectiveness of fi scal surveillance. This paper provides a comprehensive review of the changing fortunes of the CAB in the EU fi scal surveillance framework. It portrays its main shortcomings and the way they are dealt with in practice.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cyclically adjusted budget balance, Stability and Growth Pact, Fiscal Policy
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination

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