{
  "title": "Growth Dividend from Stabilizing Fiscal Policies",
  "publication": "IMF Blog, April 8, 2015",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/04/08/growth-dividend-from-stabilizing-fiscal-policies",
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  "summary": "Study covers experience with fiscal stabilization during the past three decades in a broad sample of 85 advanced, emerging market, and developing economies.",
  "sections": [
    {
      "heading": "Key findings on fiscal stabilization and growth",
      "content": "- Study covers experience with fiscal stabilization during the past three decades in a broad sample of 85 advanced, emerging market, and developing economies.\n- Governments can use fiscal policy to smooth fluctuations in economic activity, and this can lead to higher medium-term growth.\n- In advanced economies, making fiscal policies more stabilizing could cut output volatility by about 15 percent, with a growth dividend of about 0.3 percentage point annually.\n- Fiscal stabilization coefficients measure the impact of a one percentage-point change in output on the budget balance (in percent of GDP); a coefficient equal to 1 means the fiscal response is exactly of the same size as the initial shock.\n- Fiscal stabilization coefficients can be quite sizable, especially in advanced economies; in emerging markets and developing economies stabilization is generally more modest and less frequent, though some have large coefficients.\n- Cross-country correlations between volatility and stabilization coefficients are clearly negative, indicating overall reduction in output volatility due to fiscal stabilization.\n- A more stable macroeconomic environment created by fiscal stabilization has positive effects on medium-term growth, plausibly because less uncertainty encourages investment in physical, human, and social capital."
    },
    {
      "heading": "How fiscal policy stabilizes output",
      "content": "- Fiscal policy stabilizes the economy when the budget balance increases when output rises and decreases when output falls.\n- During a contraction:\n  - Tax revenues fall with income (or tax rates can be deliberately cut), and unemployment benefits increase with the number of unemployed, helping maintain income and purchasing power.\n  - Policymakers can also raise demand directly by deliberately spending more, with a higher deficit (or lower surplus) cushioning the blow on output.\n- The response of the government budget balance to economic activity is the key to understanding fiscal contribution to output stability."
    },
    {
      "heading": "Role and limits of automatic stabilizers",
      "content": "- Automatic stabilizers—tax payments that move with income and social transfers such as unemployment benefits—operate in real time without decision or implementation lags, making them a very effective way to make fiscal policy stabilizing.\n- Fiscal actions often undermine automatic stabilizers, most notably the tendency to spend revenue windfalls during good times.\n- Simulations (described in the source) show:\n  - “Symmetric stabilization” with deficit reductions in good times fully offsetting deficit increases in bad times can produce a stable public debt path.\n  - Spending just half of revenue increases during booms while letting deficits fully absorb downturns can send debt on an upward path."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Avoid measures that destabilize output, such as spending increases in good times; stability, growth, and debt sustainability could all greatly benefit from such restraint.\n- A well-designed fiscal framework can encourage policies that preserve stabilization properties of the budget.\n- Countries could augment automatic stabilizers, but this should not be done through undue increases in taxes and transfer programs because these can have undesirable side effects on growth and employment.\n- The Fiscal Monitor discusses options to boost stabilizers while avoiding these caveats; one practical starting point is preventing certain tax deductions from increasing during booms and decreasing during recessions.\n\nSource: Growth Dividend from Stabilizing Fiscal Policies, Xavier Debrun, April 8, 2015\n\n---\n\n Content in this bundle\n\n- 稳定性财政政策的增长红利; iMFDirect博客; 2015年4月8日\n  - 稳定性财政政策的增长红利; iMFDirect博客; 2015年4月8日 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 稳定性财政政策的增长红利; iMFDirect博客; 2015年4月8日 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 安定化機能が優れた財政政策から得られる成長の配当: ザビエル・デブラン iMFdirect ブログ, 2015年4月8日掲載\n  - 安定化機能が優れた財政政策から得られる成長の配当: ザビエル・デブラン iMFdirect ブログ, 2015年4月8日掲載 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 安定化機能が優れた財政政策から得られる成長の配当: ザビエル・デブラン iMFdirect ブログ, 2015年4月8日掲載 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Chapter 2. Can Fiscal Policy Stabilize Output?, Fiscal Monitor, April 2015\n  - Chapter 2. Can Fiscal Policy Stabilize Output?, Fiscal Monitor, April 2015 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Chapter 2. Can Fiscal Policy Stabilize Output?, Fiscal Monitor, April 2015 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Дивиденды роста от стабилизирующей налогово-бюджетной политики; Ксавьер Дебрун; 8 апреля 2015 года\n  - Дивиденды роста от стабилизирующей налогово-бюджетной политики; Ксавьер Дебрун; 8 апреля 2015 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Дивиденды роста от стабилизирующей налогово-бюджетной политики; Ксавьер Дебрун; 8 апреля 2015 года (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- عربي\n- https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-1.jpg\n- https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-2.jpg\n- https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-3.jpg\n- Dams and Dikes for Public Finances\n\nSource: https://www.imf.org/en/blogs/articles/2015/04/08/growth-dividend-from-stabilizing-fiscal-policies"
    }
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    "Authors: Xavier Debrun",
    "Published: April 8, 2015",
    "Study covers experience with fiscal stabilization during the past three decades in a broad sample of 85 advanced, emerging market, and developing economies.",
    "Governments can use fiscal policy to smooth fluctuations in economic activity, and this can lead to higher medium-term growth.",
    "In advanced economies, making fiscal policies more stabilizing could cut output volatility by about 15 percent, with a growth dividend of about 0.3 percentage point annually.",
    "Fiscal stabilization coefficients measure the impact of a one percentage-point change in output on the budget balance (in percent of GDP); a coefficient equal to 1 means the fiscal response is exactly of the same size as the initial shock.",
    "Fiscal stabilization coefficients can be quite sizable, especially in advanced economies; in emerging markets and developing economies stabilization is generally more modest and less frequent, though some have large coefficients.",
    "Cross-country correlations between volatility and stabilization coefficients are clearly negative, indicating overall reduction in output volatility due to fiscal stabilization.",
    "A more stable macroeconomic environment created by fiscal stabilization has positive effects on medium-term growth, plausibly because less uncertainty encourages investment in physical, human, and social capital.",
    "Fiscal policy stabilizes the economy when the budget balance increases when output rises and decreases when output falls.",
    "During a contraction:",
    "The response of the government budget balance to economic activity is the key to understanding fiscal contribution to output stability.",
    "Automatic stabilizers—tax payments that move with income and social transfers such as unemployment benefits—operate in real time without decision or implementation lags, making them a very effective way to make fiscal policy stabilizing.",
    "Fiscal actions often undermine automatic stabilizers, most notably the tendency to spend revenue windfalls during good times.",
    "Simulations (described in the source) show:",
    "Avoid measures that destabilize output, such as spending increases in good times; stability, growth, and debt sustainability could all greatly benefit from such restraint.",
    "A well-designed fiscal framework can encourage policies that preserve stabilization properties of the budget.",
    "Countries could augment automatic stabilizers, but this should not be done through undue increases in taxes and transfer programs because these can have undesirable side effects on growth and employment.",
    "The Fiscal Monitor discusses options to boost stabilizers while avoiding these caveats; one practical starting point is preventing certain tax deductions from increasing during booms and decreasing during recessions.",
    "**稳定性财政政策的增长红利; iMFDirect博客; 2015年4月8日**",
    "**安定化機能が優れた財政政策から得られる成長の配当: ザビエル・デブラン iMFdirect ブログ, 2015年4月8日掲載**",
    "**Chapter 2. Can Fiscal Policy Stabilize Output?, Fiscal Monitor, April 2015**",
    "**Дивиденды роста от стабилизирующей налогово-бюджетной политики; Ксавьер Дебрун; 8 апреля 2015 года**",
    "[عربي](http://blog-montada.imf.org/?p=3608)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-1.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-2.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-3.jpg](https://www.imf.org/wp-content/uploads/2015/04/fm-apr2015-blog-chart-3.jpg)",
    "[Dams and Dikes for Public Finances](http://blogs.imf.org/2015/03/18/dams-and-dikes-for-public-finances/)"
  ],
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