International Monetary Fund. Fiscal Affairs Dept.
Published Date:
October 2012
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Automatic stabilizers

Budgetary measures that dampen fluctuation in real GDP, automatically triggered by the tax code and by spending rules.

Contingent liabilities

Obligations of a government whose timing and magnitude depend on the occurrence of some uncertain future event outside the government’s control. Can be explicit (obligations based on contracts, laws, or clear policy commitments) or implicit (political or moral obligations) and sometimes arise from expectations that government will intervene in the event of a crisis or a disaster, or when the opportunity cost of not intervening is considered to be unacceptable.

Credit default swap (CDS) spread

Annual amount (in basis points of the notional amount) that a protection buyer must pay the seller over the length of the contract to protect the underlying asset against a credit event.

Cyclical balance

Cyclical component of the overall fiscal balance, computed as the difference between cyclical revenues and cyclical expenditures. The latter are typically computed using country-specific elasticities of aggregate revenue and expenditure series with respect to the output gap. Where unavailable, standard elasticities (0, 1) are assumed for expenditure and revenue, respectively.

Cyclically adjusted balance (CAB)

Difference between the overall balance and the automatic stabilizers; equivalently, an estimate of the fiscal balance that would apply under current policies if output were equal to potential.

Cyclically adjusted (CA) expenditure and revenue

Revenue and expenditure adjusted for temporary effects associated with the deviation of actual from potential output (i.e., net of automatic stabilizers).

Cyclically adjusted primary balance (CAPB)

Cyclically adjusted balance excluding net interest payments.

Expenditure elasticity

Elasticity of expenditure with respect to the output gap.

Fiscal multiplier

The ratio of a change in output to an exogenous and temporary change in the fiscal deficit with respect to their respective baselines.

Fiscal stimulus

Discretionary fiscal policy actions (including revenue reductions and spending increases) adopted in response to the financial crisis.

General government

All government units and all nonmarket, nonprofit institutions that are controlled and mainly financed by government units comprising the central, state, and local governments; does not include public corporations or quasi-corporations.

Gross debt

All liabilities that require future payment of interest and/or principal by the debtor to the creditor. This includes debt liabilities in the form of Special Drawing Rights, currency, and deposits; debt securities; loans; insurance, pension, and standardized guarantee schemes; and other accounts payable. (See the 2001 edition of the IMF’s Government Financial Statistics Manual and the Public Sector Debt Statistics Manual). The term “public debt” is used in the Monitor, for simplicity, as synonymous with gross debt of the general government, unless otherwise specified. (Strictly speaking, the term “public debt” refers to the debt of the public sector as a whole, which includes financial and nonfinancial public enterprises and the central bank.)

Gross financing needs (also gross financing requirements)

Overall new borrowing requirement plus debt maturing during the year.

Interest rate–growth differential (rg)

Effective interest rate (r, defined as the ratio of interest payments over the debt of the preceding period) minus nominal GDP growth (g), divided by 1 plus nominal GDP growth: (r – g)/(1 + g).

Labor tax wedge

Difference between the labor costs paid by employers and the net compensation received by workers due to income taxes and social insurance contributions.

Net debt

Gross debt minus financial assets, including those held by the broader public sector: for example, social security funds held by the relevant component of the public sector, in some cases.

Nonfinancial public sector

General government plus nonfinancial public corporations.

Output gap

Deviation of actual from potential GDP, in percent of potential GDP.

Overall fiscal balance (also “headline” fiscal balance)

Net lending/borrowing, defined as the difference between revenue and total expenditure, using the 2001 edition of the IMF’s Government Finance Statistics Manual (GFSM 2001). Does not include policy lending. For some countries, the overall balance continues to be based on GFSM 1986, in which it is defined as total revenue and grants minus total expenditure and net lending.

Policy lending

Transactions in financial assets that are deemed to be for public policy purposes but are not part of the overall balance.

Primary balance

Overall balance excluding net interest payment (interest expenditure minus interest revenue).

Public debt

See Gross debt.

Public sector

The general government sector plus government-controlled entities, known as public corporations, whose primary activity is to engage in commercial activities.

Revenue elasticity

Elasticity of revenue with respect to the output gap.

Stock-flow adjustment

Annual change in gross debt not explained by the budget balance.

Structural fiscal balance

Difference between the cyclically adjusted balance and other non-recurrent effects that go beyond the cycle, such as one-off operations and other factors whose cyclical fluctuations do not coincide with the output cycle (for instance, asset and commodity prices and output composition effects).

Tax expenditures

Government revenues that are foregone as a result of preferential tax treatments to specific sectors, activities, regions, or economic agents.

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