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Do automatic stabilisers take care of asymmetric shocks in the euro area?

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Author Info
Jaakko Kiander
Matti Virén
Abstract

This paper deals with the question whether the automatic fiscal stabilisers are strong enough to solve the problem of asymmetric shocks in the Euro area. The question is important for many reasons, for instance in terms of policy coordination and fiscal federalism. The paper reviews the current estimates of automatic stabilisers and structural deficits published by the EU, IMF and OECD. The differences between the countries as well as the stability and consistency of the estimated measures is scrutinised. In addition to this, we present also out own estimation results on the working of the automatic stabilisers and runs sensitivity analyses for EU countries to see, how likely the countries are to violate the Maastricht deficit criterion if they face country-specific output or export shocks or interest-rate shocks.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 234.

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Date of creation: 01 Dec 2000
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Handle: RePEc:fer:dpaper:234

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Related research
Keywords: Fiscal Policy; structural deficits; monetary union;

Find related papers by JEL classification:
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
E00 - Macroeconomics and Monetary Economics - - General - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Barrell, R. & Pina, A.M., 2000. "How Important are Automatic Stabilizers in Europe? A Stochastic Simulation Assessment," Economics Working Papers eco2000/2, European University Institute.
    Other versions:
  2. Dury, K. & Pina, A.M., 2000. "Fiscal Policy in EMU: Simulating the Operation of the Stability Pact," Economics Working Papers eco2000/3, European University Institute.
    Other versions:
  3. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Sachs, Jeffrey & Sala-i-Martin, Xavier, 1992. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States," CEPR Discussion Papers 632, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Willi Leibfritz & Deborah Roseveare & Paul van den Noord, 1994. "Fiscal Policy, Government Debt and Economic Performance," OECD Economics Department Working Papers 144, OECD, Economics Department. [Downloadable!]
  6. Fatás, Antonio & Mihov, Ilian, 1999. "Government Size and Automatic Stabilizers: International and Intranational Evidence," CEPR Discussion Papers 2259, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Peter Brandner & Leopold Diebalek & Helene Schuberth, 1998. "Structural budget deficits and sustainability of fiscal positions in the european union," Working Papers 26, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  8. Buti, Marco & Franco, Daniele & Ongena, Hedwig, 1998. "Fiscal Discipline and Flexibility in EMU: The Implementation of the Stability and Growth Pact," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 81-97, Autumn.
  9. Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Darrel Cohen & Glenn Follette, 1999. "The automatic fiscal stabilizers: quietly doing their thing," Finance and Economics Discussion Series 1999-64, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD, Economics Department. [Downloadable!]
  12. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR, CES, MSH, vol. 13(26), pages 205-259, 04. [Downloadable!] (restricted)
  13. Erkki Koskela & Matti Virén, 1999. "Is There a Laffer Curve Between Output and Public Sector Employment?," Discussion Papers 194, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  14. Matti Virén, 1998. "Do the OECD Countries Follow the Same Fiscal Policy Rule?," Discussion Papers 186, Government Institute for Economic Research Finland (VATT). [Downloadable!]
  15. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kerstin Bernoth & Andrew Hughes Hallet & John Lewis, 2008. "Did fiscal policy makers know what they were doing? Reassessing fiscal policy with real-time data," DNB Working Papers 169, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  2. Matti Virén, 2000. "Fiscal Policy, Automatic Stabilisers and Policy Coordination in EMU," Discussion Papers 744, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Gábor Orbán & György Szapáry, 2004. "The Stability and Growth Pact from the Perspective Of the New Member States," William Davidson Institute Working Papers Series 2004-709, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
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