Automatic Stabilizers in a European Perspective

Frédérique Bec and Jean-Olivier Hairault

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Abstract: The aim of this paper is to compare the efficiency of automatic stabilizers and direct transfers mechanisms involved by a federal budget. The theoretical framework consists in a stochastic two-country two-good model, assuming that financial markets are incomplete, labour is immobile internationally and taxes are distorsive. The resulting finding is that direct transfers based on the net foreign account of each country may provide a perfect risk sharing for private agents, but only if these latter do not modify their individual savings decisions.

Keywords: Incomplete financial markets; Federal budget; Transfers mechanisms; Risk sharing; International Business Cycles; Automatic stabilizers (search for similar items in EconPapers)
Date: 1997
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Published in BUSINESS CYCLES AND MACROECONOMIC STABILITY, pp.189-208, 1997, 9781461378303. ⟨10.1007/978-1-4615-6173-6⟩

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Working Paper: Automatic Stabilizers in a European Perspective (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01314151

DOI: 10.1007/978-1-4615-6173-6

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