How Important are Automatic Stabilisers in Europe? A Stochastic Simulation Assessment

Ray Barrell

No 196, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: In this paper we formalize budgetary stabilisers as a set of simple policy rules, and assess their operation in an uncertain environment by performing stochastic simulations in a forward-looking multi-country macroeconometric model, NiGEM, comprising individual blocks for 10 Euroland economies. Automatic stabilisers make output volatility decrease by 11 per cent for Euroland as a whole Ð less than in previous studies, as these have overemphasised demand shocks. We also find that, provided countries comply with their announced fiscal consolidation programmes, built-in stabilisers and the Stability and Growth Pact are broadly compatible.

Date: 2002-03
New Economics Papers: this item is included in nep-eec and nep-mac
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Related works:
Journal Article: How important are automatic stabilisers in Europe? A stochastic simulation assessment (2004)
Working Paper: How Important are Automatic Stabilizers in Europe? A Stochastic Simulation Assessment (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:196

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