Abstract

Definition

Term

Definition

Automatic stabilizers

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

Credit default swap (CDS) spread

Annual amount (in basis points of the notional amount) that the 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)

Overall balance minus cyclical balance.

Cyclically adjusted (CA) expenditure and revenue

Revenue and expenditure adjusted for the effect of the economic cycle (that is, net of cyclical revenue and expenditure).

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 Government Financial Statistics Manual 2001 and 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 enter-prises and the central bank.)

Gross financing needs

Overall new borrowing requirement plus debt maturing during the year.

Headline fiscal balance

See Overall fiscal balance.

Interest rate-growth differential (r - g)

Effective interest rate—defined as the ratio of interest payments over the debt of the preceding period—minus nominal GDP growth.

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.

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 deficit.

Structural fiscal balance

Cyclically adjusted balance, corrected for one-off and other factors, such as asset and commodity prices and output compositions effects.

Tax expenditures

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

VIX

Chicago Board Options Exchange Volatility Index, a measure of the market’s expectation of stock market volatility over the next 30-day period. The VIX is a weighted blend of prices for a range of options on the Standard & Poor’s 500 index.

Balancing Fiscal Policy Risks
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