Liability-Creating versus Non-liability-Creating Fiscal Stabilisation Policies: Ricardian Equivalence, Fiscal Stabilisation, and EMU
AbstractThis paper looks at theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy. It argues that such stabilizers operate most effectively at a national, rather than local, level. As differing cycles across regions tend to offset each other for the country as a whole, national fiscal stabilizers are not associated with the same increase in future tax liabilities for the region as local ones. Accordingly, the negative impact from the Ricardian effects associated with these tax liabilities is smaller. Empirical work on data across Canadian provinces indicates that local stabilizers are only 1/3 to 1/2 as effective as national stabilizers which create no future tax liability.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 108 (1998)
Issue (Month): 449 (July)
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Other versions of this item:
- Bayoumi, Tamim & Masson, Paul R, 1998. "Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies: Ricardian Equivalence, Fiscal Stabilization and EMU," CEPR Discussion Papers 1984, C.E.P.R. Discussion Papers.
- Paul R. Masson & Tamim Bayoumi, 1998. "Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies - Ricardian Equivalence, Fiscal Stabilization, and EMU," IMF Working Papers 98/112, International Monetary Fund.
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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- Gonzalez, Christian Y. & Rosenblatt, David & Webb, Steven B., 2002. "Stabilizing intergovernmental transfers in Latin America : a complement to national/subnational fiscal rules?," Policy Research Working Paper Series 2869, The World Bank.
- Gianluigi Giorgioni & Ken Holden, 2003. "Ricardian equivalence, expansionary fiscal contraction and the stock market: a VECM approach," Applied Economics, Taylor & Francis Journals, vol. 35(12), pages 1435-1443.
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