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

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  • Kiander, Jaakko
  • Virén, Matti

Abstract

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.

Suggested Citation

  • Kiander, Jaakko & Virén, Matti, 2000. "Do automatic stabilisers take care of asymmetric shocks in the euro area?," Discussion Papers 234, VATT Institute for Economic Research.
    • Handle: RePEc:fer:dpaper:234
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    1. Orban, Gabor & Szapary, Gyorgy, 2004. "The Stability and Growth Pact from the perspective of the new member states," Journal of Policy Modeling, Elsevier, vol. 26(7), pages 839-864, October.
    2. VirÉn, Matti, 2000. "Fiscal Policy, Automatic Stabilisers and Policy Coordination in EMU," Discussion Papers 744, The Research Institute of the Finnish Economy.
    3. Jan A. Swanepoel, 2004. "The Monetary‐Fiscal Policy Mix In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 72(4), pages 730-758, September.
    4. Hughes Hallett, Andrew & Bernoth, Kerstin & Lewis, John, 2008. "Did Fiscal Policy Makers Know What They Were Doing? Reassessing Fiscal Policy with Real Time Data," CEPR Discussion Papers 6758, C.E.P.R. Discussion Papers.
    5. Bernoth, Kerstin & Hughes Hallett, Andrew & Lewis, John, 2008. "Did Fiscal Policy Makers Know What They Were Doing? Reassessing Fiscal Policy with Real Time Data," CEPR Discussion Papers 6758, C.E.P.R. Discussion Papers.
    6. Szapáry, György & Orbán, Gábor, 2004. "A stabilitási és növekedési paktum az új tagállamok szemszögéből [The Stabilization and Growth Pact in the light of the new EU member-states]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 810-831.

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