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Cyclical outputs and structural budget balances

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Structural budget balances are intertwined with cyclical outputs and lie at the heart of most fiscal surveillance assessments. Failure to comply with adequate goals is largely feared as a step forward towards a foretold unstable environment. We show that alternative cyclical indicators, including those suggested by pivotal international institutions, provide an evaluation of the Portuguese case that has both converging features and important discrepancies. Discrepancies are particularly striking when the evalutation is focused on structural balance levels—with an average amplitude across estimates of 1.5 percentage points over 1999-2018—, whereas similarities are clearer when based on the changes in structural balances—with an average amplitude dropping to 0.3 percentage points. We also highlight significant revisions in the European Commission estimates and find that comparisons with selected benchmarks lead to model-dependent assessments.
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