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The Significance of Federal Taxes as Automatic Stabilizers

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  • Gabriel Di Bella

Abstract

In this paper, a simple methodology to assess the effectiveness of automatic stabilizers is proposed and empirically tested using French data for the period 1970-2000. The paper concludes that fiscal stabilizers have dampened output variability by approximately 35 45 percent depending on the measure of potential output used. In addition, the results indicate that fiscal stabilizers mainly operated through the reduction of private investment fluctuations from 1970 to 1985, and through the reduction of private consumption variability thereafter. Due to the counterfactual nature of the analysis performed, the simplicity of the theoretical model, and simultaneity issues that might introduce biases, the results can at most be interpreted as approximations of the phenomenon that is analyzed.

Suggested Citation

  • Gabriel Di Bella, 2002. "The Significance of Federal Taxes as Automatic Stabilizers," IMF Working Papers 2002/199, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/199
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16038
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    References listed on IDEAS

    as
    1. Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67.
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    9. Alan J. Auerbach & Daniel R. Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 37-56, Summer.
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    12. Olivier Jean Blanchard, 2000. "The automatic fiscal stabilizers: quietly doing their thing - commentary," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 69-74.
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    Cited by:

    1. Raphaël Espinoza, 2007. "Les stabilisateurs automatiques en France," Économie et Prévision, Programme National Persée, vol. 177(1), pages 1-17.

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