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The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond
- Paul van den Noord1
- Author Affiliations
- 1: OECD, France
- 19 Jan 2000
- Bibliographic information
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 ...
- fiscal policy, business cycles, automatic stabilisers, public finances
- JEL Classification:
- E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
- H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / General
- H60: Public Economics / National Budget, Deficit, and Debt / General