Automatic Fiscal Stabilizers

Author/Editor: Steven A. Symansky ; Thomas Baunsgaard
Publication Date: September 28, 2009
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Summary: This paper discusses how to enhance automatic stabilizers without increasing the size of government. We distinguish between permanent changes in the parameters of the tax and expenditure system (e.g., changes in tax progressivity) that will enhance the traditional automatic stabilizer, and temporary changes triggered by certain economic developments (e.g., tax measures targeted at credit and liquidity constrained households, triggered during a severe downturn). We argue that, with some exceptions, the latter are preferable as they can be implemented with lower disruptions in other fiscal policy goals (e.g., economic efficiency). Moreover, countries should also avoid introducing procyclicality as a result of fiscal rules, as these would offset the effect of existing automatic stabilizers.
Series: Staff Position Note No. 2009/23
Frequency: Annually
Subject(s): Budgets | Corporate sector | Fiscal management | Fiscal stability | Government expenditures | Income taxes | Stabilization measures

Author's Keyword(s): Fiscal policy | automatic stabilizers | business cycle fluctuations | fiscal rules | budget | expenditure policy | tax policy | fiscal federalism | macroeconomic stabilization
Publication Date: September 28, 2009
ISBN/ISSN: 9781455290567 Format: Paper
Stock No: SPNEA2009023 Pages: 26
US$10.00 (Academic Rate:
US$10.00 )
Publication Date: September 28, 2009
ISBN/ISSN: 978-1-58906-908-4 / 2072-3202 Format: A web quality merged PDF
Stock No: SPNET2009023 Pages: 26
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