IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Government size and output volatility: should we forsake automatic stabilization?

  • Xavier Debrun
  • Jean Pisani-Ferry
  • Andr� Sapir

Prior to the launch of the euro, academics and policymakers were concerned that the loss of the monetary policy instrument would deprive participating countries of a vital tool to respond to country-specific economic shocks. This concern was rooted in the generally accepted proposition that market-based adjustment channels-i.e. labour mobility and capital flows-tended to be weaker among euro area countries than among regions of existing monetary unions such as the United States. Automatic stabilizers had long been regarded as playing a key role in macroeconomic stabilization. In particular, they were generally considered as having contributed significantly to the decrease of output volatility witnessed in Europe and in the United States after World War II, when the size of governments increased substantially on both sides of the Atlantic. Hence it was hoped that improved national fiscal policy could partly make up for the loss of monetary policy in stabilizing national macroeconomic conditions. The aim of the paper is to discuss this issue in the light of recent experience.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ec.europa.eu/economy_finance/publications/publication12383_en.pdf
Download Restriction: no

Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 316.

as
in new window

Length: 72 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:euf:ecopap:0316
Contact details of provider: Postal: Coomunivcations Unit, B-1049 Bruxelles / Brussels
Fax: +32 2 298.08.23
Web page: http://ec.europa.eu/economy_finance/index_en.htm
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  2. André Sapir & Philippe Aghion & Giuseppe Bertola & Martin Hellwig & Jean Pisani-Ferry & Bernard Lange & José Viñals & Helen Wallace & Marco Buti & Mario Nava & Peter Smith, 2004. "An agenda for a growing Europe: the Sapir report," ULB Institutional Repository 2013/8070, ULB -- Universite Libre de Bruxelles.
  3. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2008. "Explaining the Great Moderation: it is not the shocks," Working Paper Series 0865, European Central Bank.
  4. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
  5. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  6. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 143-197, June.
  7. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  8. Rafael Domenech & Javier Andres & Antonio Fatas, 2006. "The Stabilizing Role of Government Size," Working Papers 0603, International Economics Institute, University of Valencia, revised Jan 2007.
  9. Afonso, António & Ebert, Werner & Schuknecht, Ludger & Thöne, Michael, 2005. "Quality of public finances and growth," Working Paper Series 0438, European Central Bank.
  10. Chris Otrok, 1999. "On Measuring the Welfare Cost of Business Cycles," Virginia Economics Online Papers 318, University of Virginia, Department of Economics.
  11. Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
  12. Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
  13. Khalid Sekkat & Marco Buti & Carlos Martinez-Mongay & Paul van den Noord, 2003. "Automatic fiscal stabilisers in EMU: a conflict between efficiency and stabilization?," ULB Institutional Repository 2013/7354, ULB -- Universite Libre de Bruxelles.
  14. Fatás, Antonio & Mihov, Ilian, 1999. "Government Size and Automatic Stabilizers: International and Intranational Evidence," CEPR Discussion Papers 2259, C.E.P.R. Discussion Papers.
  15. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  16. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  17. Gali, Jordi, 1994. "Government size and macroeconomic stability," European Economic Review, Elsevier, vol. 38(1), pages 117-132, January.
  18. Julia Darby & Jacques Melitz, 2008. "Social spending and automatic stabilizers in the OECD," Economic Policy, CEPR;CES;MSH, vol. 23, pages 715-756, October.
  19. Carlos Martinez-Mongay & Khalid Sekkat, 2005. "Progressive Taxation, Macroeconomic Stabilization and efficiency in Europe," European Economy - Economic Papers 233, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  20. Christina D. Romer, 1999. "Changes in Business Cycles: Evidence and Explanations," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 23-44, Spring.
  21. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
  22. de la Fuente, Angel, 1997. "Fiscal Policy and Growth in the OECD," CEPR Discussion Papers 1755, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0316. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.