Is There Compatibility between the Stability and Growth Pact and Automatic Fiscal Stabilizers?

Sabrina Rostaing-Paris

Chapter 2 in Fiscal Policy in the European Union, 2008, pp 25-52 from Palgrave Macmillan

Abstract: Abstract The automatic stabilization issue has been permanently at the forefront of the scene, since Robert Solow invited the academic community to reconsider it in 2002. Looking at the criticisms raised against fiscal activism, rule-based fiscal policy relying on the working of automatic stabilizers provides several clear advantages. State-contingent tax revenues and expenditures dampen economic fluctuations practically with no information and implementation lags. Moreover, the impact lag of automatic stabilizers is generally considered to be relatively short. In principle, if automatic stabilizers are allowed to operate symmetrically over the cycle, they do not contribute to structural deterioration in budgetary positions.

Keywords: Monetary Policy; Fiscal Policy; Budget Deficit; Budget Balance; Fiscal Consolidation (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-22826-9_3

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DOI: 10.1057/9780230228269_3

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