ESTIMATION OF THE CYCLICALLY ADJUSTED BUDGET BALANCE - AGGREGATED AND DISAGGREGATED METHOD

Abstract

Budget deficit is one of the most important macroeconomic problems which has been debated in academic and political platform since 1970s. Monetary and tax authorities, if different, may engage in non-cooperative behavior. The behavior of the fiscal authority may affect the monetary authority's ability to achieve its inflation target. The aim of our paper was to see if the fiscal policy in Romania was pro-cyclical. In order to this, we analyzed the cyclically adjusted structural budget balance and came with the conclusion that the fiscal policy is in fact pro-cyclical because the curve of fiscal impulses follows the trend of excess demand.