Bank of Albania paper trials CAB approach to estimate fiscal position
A working paper from the Bank of Albania proposes a new approach to estimating the country's fiscal position using cyclical adjustments with the aim of capturing only the effects of discretionary fiscal policy on the budget balance.
In Cyclically-adjusted budget balance: an alternative approach in estimating the fiscal position for Albania, Anjeza Gazidede, a senior economic analyst in the central bank's monetary policy department, says the results obtained from the new approach reveal a pro-cyclical feature of fiscal policy in Albania.
The approach uses the cyclically-adjusted budget balance (CAB) first introduced by Olivier Blanchard in 1990. Gazidede says her paper aims to show a simple estimation of CAB, while the process in itself "leaves room for analytical judgements, due to the limited available data".
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