IDEAS home Printed from https://ideas.repec.org/a/oup/cesifo/v51y2005i4p511-547..html
   My bibliography  Save this article

Is there a Role for an Active Fiscal Stabilization Policy?

Author

Listed:
  • Torben M. Andersen

Abstract

This paper discusses the need and scope for an active fiscal stabilization policy. It is argued that the effectiveness of fiscal policy as a short run stabilizer does not depend on the long run multipliers of (balanced budget) fiscal policies. To the extent that activity can be affected by aggregate demand in the short run, there is a case for a fiscal stabilization policy in terms of temporary variations in taxes or public consumption contingent on the state of the economy. The effectiveness of fiscal policy is supported by empirical evidence. However, an appropriate policy intervention depends both on the nature of the shock and the structure of the economy. There are thus fundamental information problems in pursuing discretionary fiscal policies on top of political economy concerns, and fiscal fine-tuning is not to be recommended. Automatic stabilizers do not to the same extent suffer from these problems, but their strength is not by design but the net result of other policy considerations. Hence, there is a need to consider the structure and size of automatic stabilizers. (JEL E6)

Suggested Citation

  • Torben M. Andersen, 2005. "Is there a Role for an Active Fiscal Stabilization Policy?," CESifo Economic Studies, CESifo Group, vol. 51(4), pages 511-547.
    • Handle: RePEc:oup:cesifo:v:51:y:2005:i:4:p:511-547.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/cesifo/51.4.511
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gösta Ljungman, 2008. "Expenditure Ceilings—A Survey," IMF Working Papers 2008/282, International Monetary Fund.
    2. Nilsson, Kristian, 2008. "Conceptual Framework for Fiscal Policy," Occasional Papers 16, National Institute of Economic Research.
    3. Reicher, Claire, 2014. "Systematic fiscal policy and macroeconomic performance: A critical overview of the literature," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-37.
    4. Musa Success Jibrin & Success Ejura Blessing & Iyaji Danjuma, 2014. "The Effects of Public Expenditure on Private Investment and Economic Growth in Nigeria," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(2), pages 90-97.
    5. Torben M. Andersen, 2016. "Automatic stabilizers—the intersection of labour market and fiscal policies," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-18, December.
    6. Sebastian Dullien & Daniela Schwarzer, 2009. "Bringing Macroeconomics into the EU Budget Debate: Why and How?," Journal of Common Market Studies, Wiley Blackwell, vol. 47, pages 153-174, January.
    7. Francesco Furlanetto & Martin Seneca, 2012. "Rule‐of‐Thumb Consumers, Productivity, and Hours," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 658-679, June.
    8. Sebastian Dullien & Daniela Schwarzer, 2009. "Bringing Macroeconomics into the EU Budget Debate: Why and How?," Journal of Common Market Studies, Wiley Blackwell, vol. 47(1), pages 153-174, January.
    9. Bowen, Alex & Stern, Nicholas, 2010. "Environmental policy and the economic downturn," LSE Research Online Documents on Economics 37589, London School of Economics and Political Science, LSE Library.
    10. Thomas Beissinger, 2006. "Neue Anforderungen an eine gesamtwirtschaftliche Stabilisierung," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 277/2006, Department of Economics, University of Hohenheim, Germany.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:cesifo:v:51:y:2005:i:4:p:511-547.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.