The name is absent

In Table 7.7 we set out the upper and lower bounds for budget deficits in both real time
and over the full sample for 1992 and for 2004 for the UK, France and Germany using
estimates of the impacts of the gap on the deficit. We use 0.33 to represent the impact of
external shocks on deficits, 0.66 to estimate the impact of domestic demand shocks. We
also include estimates based on a sensitivity of 0.45, which is the shocks weighted
average from Barrell and Hurst (2003).

*

Table 7.7 Cyclically Adjusted Budget Deficits

Full sample Real time

Note: * Changing the effect (b) of OG on CABUD.

We are particularly interested in whether or not a set of bounds around a cyclically
adjusted deficit might for instance include a possibility that the country was close to
balance or in surplus in a cyclically adjusted sense. We can see from the table that only
France saw itself in this position, and then only in 2004 if shocks were predominantly
from consumption and the real time estimate was to be used. In this table no country and
coefficient pair, either in real time or over the full sample could be said to be clearly in
line with a Treaty commitment not to breach a deficit floor of 3 per cent of GDP, even in
a probabilistic sense of being 95% certain that this is not the case. This suggests that even
if we include all the one-off measures in the last 5 years it is very unlikely that the UK,
France and Germany have been running a structural surplus. Thus it is very likely that
they have breached a reasonable level of borrowing of 3 per cent of GDP.¹³²

The UK uses a different set of guidelines, and sets its borrowing to be no greater than the level of
public investment over a cycle. Given this has not exceeded 2 per cent of GDP we could make a

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