IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/33698.html
   My bibliography  Save this paper

Fiscal Policy as a Stabilization Tool. The Case for Quasi-Automatic Stabilizers, With an Application to the VAT

Author

Listed:
  • Olivier J. Blanchard

Abstract

Most of the focus of recent stabilization policy research and practice has been on monetary rather than fiscal policy. This paper explores how, given the limits on monetary policy, fiscal policy could play a larger role. It explores the use of quasi-automatic stabilizers, i.e. changes in taxes or transfers triggered by an aggregate variable. It discusses design issues, in particular how to make such stabilizers truly debt neutral, and what aggregate variable to use as a trigger. It then focuses on a specific stabilizer, a variable VAT rate. It shows its effect in a minimalist NK model, and then discusses a number of analytical issues, both within and out of the minimalist model, such as the implications for inflation, the choice of the tax base, the implications of liquidity constraints, the implication of anticipation effects. It ends by reviewing the empirical evidence on passthrough of VAT changes, and the effects on demand of VAT changes, permanent or temporary.

Suggested Citation

  • Olivier J. Blanchard, 2025. "Fiscal Policy as a Stabilization Tool. The Case for Quasi-Automatic Stabilizers, With an Application to the VAT," NBER Working Papers 33698, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33698
    Note: EFG
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w33698.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:33698. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.