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The budget balance can be decomposed into a cyclical and a non-cyclical, or structural, component.

The decomposition is aimed at separating cyclical influences on the budget balances resulting from the divergence between actual and potential output (the output gap), from those which are non-cyclical. Changes in the latter can be seen as a cause rather than an effect of output fluctuations and may be interpreted as indicative of discretionary policy adjustments.

It should be noted, however, that changes in resource revenues -- as a result of oil price changes, for example -- and in interest payments -- as a result of past debt accumulation or changes in interest rates -- are neither cyclical nor purely discretionary. Yet these changes are reflected in the evolution of the structural component of the budget balance.

One-off revenues from the sale of the third generation mobile telephone (often called Universal Mobile Telephone System) licenses are excluded in computing the structural balance for France (2001, 1.1% of GDP), Germany (2000, 2.5% of GDP), Italy (2000, 1.2% of GDP), the Netherlands (2000, 0.7% of GDP) and Portugal (2000, 0.4% of GDP) where reported or expected revenues are substantial.

Source Publication:
OECD Economic Outlook: Sources and Methods.


Statistical Theme: Financial statistics

Created on Monday, February 11, 2002

Last updated on Friday, March 28, 2014