Output-volatility reducing effect of automatic stabilizers: Evidence from nine EMU member states

Arbeitspapier

In this paper, we explore the output-volatility reducing role of automatic stabilizers in the nine EMU member states comprising Austria, Finland, France, Germany, Ireland, Italy, Portugal, the Netherlands, and Spain for the period 1995-2017. Overall, the empirical results obtained by using the Pooled Mean Group estimator proposed by Pesaran et al. (1999) suggest that automatic stabilizers deliver a significant counter-effect on output volatility measured by the real GDP per capita volatility in the short run. More specifically, output-volatility responses to automatic stabilizers by a reduction between -1.2 and -9.7 percentage points depending on the proxy measure used for automatic stabilizers. However, the output-volatility reducing effect of automatic stabilizers is statistically insignificant in the long run. The results support the view that automatic stabilizers are an important fiscal mechanism for the short-run output stabilization, but their output-volatility offsetting role is largely subject to what the proxy measures are used for automatic stabilizers.

Object Details

• Language: Englisch

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Fiscal Policy
• Subject: Automatic stabilizers ; Fiscal policy ; PMG estimator ; EMU member states

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Şen, Hüseyin ; Kaya, Ayşe
• Event: Veröffentlichung
• (who): ZBW – Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/206687
• Last update: 10.03.2025, 11:44 AM CET