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Is The Automatic Stabilizer Policy Effective In Combating An Economic Recession? A Case Study Of The Indonesian State Budget

Author

Listed:
  • Cucun Ahmad Syamsurijal

    (Padjadjaran University)

  • Yogi Suprayogi Sugandi

    (Padjadjaran University)

  • Asep Sumaryana

    (Padjadjaran University)

  • Slamet Usman Ismanto

    (Padjadjaran University)

Abstract

This paper examines the effectiveness of an automatic fiscal policy in dealing with an economic recession in Indonesia. By using a mixture of quantity and quality approaches, we find that the automatic stabilizer policy can be used in Indonesian state finances, whereby several components of state revenue, namely income tax, consumption tax, excise, and non-tax revenue, have elasticity of more than one. In comparison, only one component of government spending, namely interest payment, has an elasticity of more than one. We also find that activating the automatic stabilizer policy requires a particular article in the State Finance Law, that regulates when the automatic stabilizer instrument, to be used. These findings open an additional avenue for understanding the effectiveness of policy stimulus to combat the COVID-19 pandemic.

Suggested Citation

  • Cucun Ahmad Syamsurijal & Yogi Suprayogi Sugandi & Asep Sumaryana & Slamet Usman Ismanto, 2023. "Is The Automatic Stabilizer Policy Effective In Combating An Economic Recession? A Case Study Of The Indonesian State Budget," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(Special I), pages 55-76, February.
    • Handle: RePEc:idn:journl:v:26:y:2023:i:spe:p:55-76
    DOI: https://doi.org/10.59091/1410-8046.2056
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    More about this item

    Keywords

    Automatic stabilizer; Discretionary fiscal policy; Public finance management; Economic recession.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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