Fiscal policy in Europe: how effective are automatic stabilisers?

Anne Brunila, Marco Buti and Jan in 't Veld

No 177, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: It is largely recognised that fiscal policy will have larger responsibilities for cyclical stabilisation in EMU given the loss of the monetary instrument. At the same time, the EMU's budgetary framework emphasises the need to rely on automatic fiscal stabilisers, rather than active policies in cushioning the business cycle. We show that automatic stabilisers are relatively powerful in the event of shocks to private consumption, but less so in the case of shocks to private investment and exports. In the case of supply side shocks, the automatic stabilisers are largely ineffective, but this may actually be a good thing to the extent that supply-side disturbances call for structural adjustment rather than cyclical stabilisation..

Keywords: Fiscal Policy; Automatic Stabilisers; Economic and Monetary Union; Shocks; cyclical stabilisation; Brunila; Marco Buti; in 't Veld; Buti (search for similar items in EconPapers)
Pages: 32 pages
Date: 2002-09
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Citations: View citations in EconPapers (29)

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Journal Article: Fiscal Policy in Europe: How Effective Are Automatic Stabilisers? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0177

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