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Is There Compatibility between the Stability and Growth Pact and Automatic Fiscal Stabilizers?

In: Fiscal Policy in the European Union

Author

Listed:
  • Sabrina Rostaing-Paris

Abstract

The automatic stabilization issue has been permanently at the forefront of the scene, since Robert Solow invited the academic community to reconsider it in 2002. Looking at the criticisms raised against fiscal activism, rule-based fiscal policy relying on the working of automatic stabilizers provides several clear advantages. State-contingent tax revenues and expenditures dampen economic fluctuations practically with no information and implementation lags. Moreover, the impact lag of automatic stabilizers is generally considered to be relatively short. In principle, if automatic stabilizers are allowed to operate symmetrically over the cycle, they do not contribute to structural deterioration in budgetary positions.

Suggested Citation

  • Sabrina Rostaing-Paris, 2008. "Is There Compatibility between the Stability and Growth Pact and Automatic Fiscal Stabilizers?," Palgrave Macmillan Books, in: Jesús Ferreiro & Giuseppe Fontana & Felipe Serrano (ed.), Fiscal Policy in the European Union, chapter 2, pages 25-52, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-22826-9_3
    DOI: 10.1057/9780230228269_3
    as

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