Joint Estimates of Automatic and Discretionary Fiscal Policy for the OECD
Darby, Julia and Melitz, Jacques (2011) Joint Estimates of Automatic and Discretionary Fiscal Policy for the OECD. Discussion paper. University of Strathclyde, Glasgow.
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Abstract
Official calculations of automatic stabilizers are seriously flawed since they rest on the assumption that the only element of social spending that reacts automatically to the cycle is unemployment compensation. This puts into question many estimates of discretionary fiscal policy. In response, we propose a simultaneous estimate of automatic and discretionary fiscal policy. This leads us, quite naturally, to a tripartite decomposition of the budget balance between revenues, social spending and other spending as a bare minimum. Our headline results for a panel of 20 OECD countries in 1981-2003 are .59 automatic stabilization in percentage-points of primary surplus balances. All of this stabilization remains following discretionary responses during contractions, but arguably only about 3/5 of it remains so in expansions while discretionary behavior cancels the rest. We pay a lot of attention to the impact of the Maastricht Treaty and the SGP on the EU members of our sample and to real time data.
ORCID iDs
Darby, Julia ORCID: https://orcid.org/0000-0003-4425-7222 and Melitz, Jacques;-
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Item type: Monograph(Discussion paper) ID code: 67938 Dates: DateEventMarch 2011PublishedNotes: Discussion paper. Subjects: Social Sciences > Economic History and Conditions Department: Strathclyde Business School > Economics Depositing user: Pure Administrator Date deposited: 21 May 2019 15:32 Last modified: 19 Sep 2024 00:55 URI: https://strathprints.strath.ac.uk/id/eprint/67938