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Fiscal Policy and Macroeconomic Stability:Automatic Stabilizers Work, Always and Everywhere

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Author Info

  • Xavier Debrun
  • Radhicka Kapoor

Abstract

The paper revisits the link between fiscal policy and macroeconomic stability. Two salient features of our analysis are (1) a systematic test for the government's ambivalent role as a shock absorber and a shock inducer-removing a downward bias present in existing estimates of the impact of automatic stabilizers-and (2) a broad sample of advanced and emerging market economies. Results provide strong support for the view that fiscal stabilization operates mainly through automatic stabilizers. Also, the destabilizing impact of policy changes not systematically related to the business cycle may not be as robust as suggested in the literature.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/111.

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Length: 150
Date of creation: 01 May 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/111

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Related research

Keywords: Economic models; Fiscal stability;

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Cited by:
  1. Carlo Cottarelli & Annalisa Fedelino, 2010. "Automatic Stabilizers and the Size of Government: Correcting a Common Misunderstanding," IMF Working Papers 10/155, International Monetary Fund.
  2. Magdalena RĂDULESCU, 2011. "The Efficiency of the Fiscal Policy in the EU and Its Role in the Economic Recovery by Attracting FDIs," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(7), pages 23, December.
  3. Maria-Grazia Attinasi & Cristina Checherita-Westphal & Malte Rieth, 2011. "Personal income tax progressivity and output volatility: evidence from OECD countries," Working Paper Series 1380, European Central Bank.
  4. Landais, Bernard, 2011. "Conduite et efficacité de la politique économique : les leçons de la crise
    [Management and Efficiency of the Economic Policies : The Crisis' Lessons"]    ," MPRA Paper 31223, University Library of Munich, Germany.
  5. Bruno" "Rossmann & Christa" "Schlager, 2012. "Budgetpolitik in Österreich vor und nach der Finanz- und Wirtschaftskrise," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 38(2), pages 248-272.
  6. Cerón, Juan A., 2012. "La respuesta de la política fiscal a la actividad económica en los países desarrollados/Fiscal policy reaction to economic activity in developed countries," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 369 (32 pag, Abril.

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