A Decomposition Of Austria's General Government Budget Into Structural And Cyclical Components

The paper describes a model for the computation of trend output and the structural budget deficit in Austria. The calculation of trend output is based on a production function approach within a small macroeconomic model of the Austrian economy. A decomposition of public budgets into cyclical and structural components shows responsiveness to business cycle variations, and allows a better assessment of the sustainability of the budget balance. The model will be used in future forecasting rounds and links macroeconomic and budgetary variables of the WIFO-forecast to estimates for trend output and the structural budget deficit. Until now, such decomposition has not been part of the regular WIFO-forecast.