Do automatic stabilisers take care of asymmetric shocks in the euro area?

Jaakko Kiander and Matti Virén

No 234, Discussion Papers from VATT Institute for Economic Research

Abstract: This paper deals with the question whether the automatic fiscal stabilisers are strong enough to solve the problem of asymmetric shocks in the Euro area. The question is important for many reasons, for instance in terms of policy coordination and fiscal federalism. The paper reviews the current estimates of automatic stabilisers and structural deficits published by the EU, IMF and OECD. The differences between the countries as well as the stability and consistency of the estimated measures is scrutinised. In addition to this, we present also out own estimation results on the working of the automatic stabilisers and runs sensitivity analyses for EU countries to see, how likely the countries are to violate the Maastricht deficit criterion if they face country-specific output or export shocks or interest-rate shocks.

Keywords: Fiscal Policy, structural deficits, monetary union, Macroeconomic policy, Talouspolitiikka, International comparisons, Kansainväliset vertailut, Taxation and Social Transfers, Julkisen talouden rahoitus ja tulonsiirrot, E000 - Macroeconomics and Monetary Economics: General, F020 - International Economic Order; Noneconomic International Organizations; Economic Integration and Globalization: General, H300 - Fiscal Policies and Behavior of Economic Agents: General, (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (7)

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