86

International organisations define the cyclical balance in terms of the impact of the fluctuations in present activity on the public balance. We suggest an alternative method, based on the estimation of a VAR model having as variables the deficit expressed in GDP points and the GDP growth rate. The non-cyclical balance is defined as the balance that would have been obtained if GDP had remained on its trend. This method estimates the impact of the economic cycle on the public balance without it being necessary to identify a priori the modifications in legislation that are of a structural nature. In addition, it incorporates the impact of past fluctuations in activity on the present balance. However, the scale of the cyclical balance calculated using this approach remains sensitive to the choice of GDP trend.