Policy Article

Comparison of the Modification Proposals for the Federal Governments Potential Output Estimation

Authors

  • Jens Boysen-Hogrefe
  • Timo Hoffmann
Publication Date

A business cycle adjustment procedure is carried out as part of the debt brake, so that temporary economic fluctuations do not affect the planning of the budget and its implementation. This allows additional debt in weaker times and requires corresponding surpluses in stronger phases. In the coalition agreement, it was agreed to evaluate the federal government's business cycle adjustment and to modify it if necessary. For this purpose, the Federal Ministry of Economics and Climate Protection launched a participation process in which suggestions for improvement could be submitted. The focus of the authors’ contribution is the evaluation of the submissions based on a real-time dataset of the federal government's projections from the past ten years. In addition to the submissions, other modifications and statistical filtering methods are also evaluated. The authors’ main result is that none of the examined procedures was able to score as superior along all criteria.

Info

Key Words

  • Debt Brake
  • Business Cycle Adjustment
  • Potential Output
  • Participation Process

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