In this paper, we present a disaggregated framework for the analysis of past and projectedÂ structural developments in the most relevant revenue and expenditure categories and the fiscalÂ balance. The framework, in particular, distinguishes between the effects of discretionary fiscalÂ policy and of macroeconomic and other developments and is sufficiently standardised to beÂ used in multi-country studies.
Here, it is applied to Belgium, Finland, Germany, Italy, the Netherlands and Portugal over theÂ period 1998 to 2004. During this period the structural primary balance ratio clearly worsenedÂ in all countries except Finland. In Belgium, Italy and the Netherlands, both revenue andÂ expenditure contributed to the deterioration of the structural primary balance. In Germany theÂ large deterioration in revenue was partially offset by the decline in the structural primaryÂ expenditure ratio, while the opposite was true for Portugal. The analysis highlights the variousÂ factors that contributed to these developments.
ECB-paperÂ written together with a lot of people. It’s complicated.