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The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond

Listed author(s):
  • Paul van den Noord

This paper assesses to what extent some components of government budgets affected by the macroeconomic situation operate to smooth the business cycle in individual OECD countries. It is shown that these automatic fiscal stabilisers have generally reduced cyclical volatility in the 1990s. However, in some countries the need to undertake fiscal consolidation in order to improve public finances has forced governments to take discretionary actions that have reduced, or even offset, the effect of automatic fiscal stabilisers. This paper also shows that, by preventing sharp economic fluctuations, fiscal stabilisers may raise long-term economic performance and avoid frequent changes in spending or tax rates. However, they should be employed symmetrically over the cycle in order to avoid costly debt accumulation ... Ce papier évalue dans quelle mesure certaines composantes des budgets publics affectées par la situation macroéconomique contribuent à lisser les cycles économiques dans chaque pays de l’OCDE. L’analyse montre qu’au cours de la dernière décennie ces stabilisateurs automatiques ont généralement eu tendance à réduire la variabilité conjoncturelle. Cependant, dans certains pays, la nécessité d’assainir les finances publiques a conduit les gouvernements à prendre des mesures discrétionnaires qui ont réduit, voire annulé, les effets des stabilisateurs automatiques. Ce papier montre aussi qu’en empêchant de trop fortes fluctuations économiques, les stabilisateurs automatiques peuvent accroître la performance économique à long terme et éviter des variations des dépenses ou des taux d’imposition trop fréquents. Ils doivent toutefois être utilisés de manière symétrique au cours du cycle pour éviter un accroissement coûteux du niveau d’endettement ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 230.

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Date of creation: 19 Jan 2000
Handle: RePEc:oec:ecoaaa:230-en
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