International Finance Discussion Papers (IFDP)
February 1986
International Comparisons of Fiscal Policy: The OECD and the IMF Measures of Fiscal Impulse
Garry J. Schinasi
Abstract:
Both the OECD and the IMF periodically estimate and publish measures of fiscal impulse to gauge the extent to which fiscal policy in the major industrial countries has become more or less expansive over time. This paper compares these measures analytically and numerically. The paper shows that the OECD and IMF measures of fiscal impulse differ in at least four fundamental ways: (1) the OECD includes fiscal drag under the presumption that it is part of the "structure" of fiscal policy, while the IMF excludes it from its adjusted measure of the budget balance; (2) the OECD and the IMF both adjust for cyclical factors but they do so differently; (3) the OECD estimates its marginal tax and expenditure rates from a structural model whereas the IMF assumes unit income-elasticity of its parameters and uses historical average tax and spending rates; and (4) each agency uses different estimates of potential output. The paper then numerically allocates differences in the published figures of the OECD and the IMF to these various sources. The paper assesses the usefulness of each measure.
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