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