Sep 21, 2004

Articles in journals

Pina, A., Barrell, R.

21

34

In this paper we formalize budgetary stabilisers as a set of simple policy rules, and assess their operation in an uncertain environment by performing stochastic simulations in a forward-looking multi-country macroeconometric model, NiGEM, comprising individual blocks for 10 Euroland economies. Automatic stabilisers make output volatility decrease by 11% for the Euroland as a whole – less than in previous studies, as these have overemphasised demand shocks. We also find that, provided countries comply with their announced fiscal consolidation programmes, built-in stabilisers and the Stability and Growth Pact are broadly compatible.

Automatic stabilisers,Fiscal policy rules,Stochastic simulation,Stability Pact