IS THE AUTOMATIC STABILIZER POLICY EFFECTIVE IN COMBATING AN ECONOMIC RECESSION? A CASE STUDY OF THE INDONESIAN STATE BUDGET

Cucun Ahmad Syamsurijal (), Yogi Suprayogi Sugandi (), Asep Sumaryana () and Slamet Usman Ismanto ()
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Cucun Ahmad Syamsurijal: Padjadjaran University
Yogi Suprayogi Sugandi: Padjadjaran University
Asep Sumaryana: Padjadjaran University
Slamet Usman Ismanto: Padjadjaran University

Bulletin of Monetary Economics and Banking, 2023, vol. 26, issue Special Issue, 55-76

Abstract: This paper examines the effectiveness of an automatic fiscal policy in dealing with an economic recession in Indonesia. By using a mixture of quantity and quality approaches, we find that the automatic stabilizer policy can be used in Indonesian state finances, whereby several components of state revenue, namely income tax, consumption tax, excise, and non-tax revenue, have elasticity of more than one. In comparison, only one component of government spending, namely interest payment, has an elasticity of more than one. We also find that activating the automatic stabilizer policy requires a particular article in the State Finance Law, that regulates when the automatic stabilizer instrument, to be used. These findings open an additional avenue for understanding the effectiveness of policy stimulus to combat the COVID-19 pandemic.

Keywords: Automatic stabilizer; Discretionary fiscal policy; Public finance management; Economic recession. (search for similar items in EconPapers)
JEL-codes: E62 H12 H62 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:26:y:2023:i:spe:p:55-76

DOI: 10.59091/1410-8046.2056

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