{
  "title": "Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies: Ricardian Equivalence, Fiscal Stabilization, and EMU",
  "publication": "IMF Working Papers, August 1, 1998",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/liability-creating-versus-non-liability-creating-fiscal-stabilization-policies-ricardian-2681",
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  "summary": "This paper looks at theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy. It argues that such stabilizers operate most effectively at a national, rather than local, level.",
  "sections": [
    {
      "heading": "Summary — main findings",
      "content": "- The paper examines theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy.\n- Fiscal stabilizers operate most effectively at a national, rather than local, level.\n- Differing cycles across regions tend to offset each other for the country as a whole, so national fiscal stabilizers are not associated with the same increase in future tax liabilities for the region as local ones.\n- Accordingly, the negative impact from the Ricardian effects associated with these tax liabilities is smaller for national stabilizers.\n- Empirical analysis using data across Canadian provinces indicates that local stabilizers are only 1/3 to ½ as effective as national stabilizers that create no future tax liability."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subjects: Consumption, Fiscal policy, Fiscal stabilization, Government consumption, Income, National accounts, Personal income\n- Keywords: beginning-of-period government debt, Consumption, deficit variable, Europe, Fiscal Stabilization, Government consumption, Income, Keynesian deficit finance, Levels of Government, liability-creating deficit, Personal income, Ricardian Equivalence, tax liability, WP"
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- National-level fiscal stabilizers can provide more effective stabilization because regional cycle offsets reduce the implied increase in future regional tax liabilities.\n- Policies that create no future tax liability at the national level produce smaller Ricardian negative effects compared with local liability-creating policies.\n- For federations or monetary unions (e.g., EMU contexts), reliance on national or central fiscal stabilization mechanisms may yield stronger stabilizing outcomes than decentralized, liability-creating local fiscal responses.\n\nSource: IMF Working Paper — \"Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies: Ricardian Equivalence, Fiscal Stabilization, and EMU\", Paul R Masson and Tamim Bayoumi, August 1, 1998.\n\n---\n\n Content in this bundle\n\n- wp98112\n  - wp98112 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp98112 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/liability-creating-versus-non-liability-creating-fiscal-stabilization-policies-ricardian-2681"
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    "Authors: Paul R Masson, Tamim Bayoumi",
    "Published: August 1, 1998",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451853575.001",
    "The paper examines theoretical and empirical issues associated with the operation of fiscal stabilizers within an economy.",
    "Fiscal stabilizers operate most effectively at a national, rather than local, level.",
    "Differing cycles across regions tend to offset each other for the country as a whole, so national fiscal stabilizers are not associated with the same increase in future tax liabilities for the region as local ones.",
    "Accordingly, the negative impact from the Ricardian effects associated with these tax liabilities is smaller for national stabilizers.",
    "Empirical analysis using data across Canadian provinces indicates that local stabilizers are only 1/3 to ½ as effective as national stabilizers that create no future tax liability.",
    "Subjects: Consumption, Fiscal policy, Fiscal stabilization, Government consumption, Income, National accounts, Personal income",
    "Keywords: beginning-of-period government debt, Consumption, deficit variable, Europe, Fiscal Stabilization, Government consumption, Income, Keynesian deficit finance, Levels of Government, liability-creating deficit, Personal income, Ricardian Equivalence, tax liability, WP",
    "National-level fiscal stabilizers can provide more effective stabilization because regional cycle offsets reduce the implied increase in future regional tax liabilities.",
    "Policies that create no future tax liability at the national level produce smaller Ricardian negative effects compared with local liability-creating policies.",
    "For federations or monetary unions (e.g., EMU contexts), reliance on national or central fiscal stabilization mechanisms may yield stronger stabilizing outcomes than decentralized, liability-creating local fiscal responses.",
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