Business Cycles and Macroeconomic Stability

Setting the issue "Most economists consider the marked increase in automatic stabilizers a highly favorable development with respect to maintenance of economic stability". Besides the rare privilege of having being signed by both Milton Friedman and Paul Samuelson (Depres,Friedman, Hart, Samuelson, and Wallace [1950]), among others, this sentence expressed as soon as 1950 the consensus view on the stabilizing effect of fiscal rules governing tax revenue and public expendi tures and transfers. This positive ex ante assessment will have been confirmed ex post as part of the explanation for post war stabilization (Burns [1960], de Long and Summers [1986], Moore and Zarnovitz [1986]). However, it becomes disputed in both its positive and normative aspects. Many institutional changes since the eighties point at curbing back the transfer mechanisms underlying automatic stabilizers, and legal restraints on deficits such as the US balanced budget amendment or the European Maastricht criteria would involve serious risks for the future of stabilizers. Under such rules "the government would become, almost inevitally, a destabilizer rather than a stabilizer" said Joseph Stiglitz, quoted by the New York Times (April 1995)). "Built-in stabilizers are automatic fiscal adjustments that reduce the national income multiplier and thus cushion the effects of changes in autonomous spend ing on the level of income" (Pechman [1987]). Early analyses of the automatic fiscal stabilizers include the contributions of A. G. Hart [1945], R. Musgrave and M. Miller (1948) and E. C. Brown (1955).

Klappentext

The future of built-in stabilizers is currently a matter of concern due to the various challenges arising from the processes of fiscal consolidation, international integration and the reflux from the welfare state. The book gathers relevant material for assessing the issue from both theoretical and empirical research. br/ This volume describes the stabilization properties of fiscal policies on business cycles and growth within dynamic equilibrium models. It also gives attention to automatic stabilization within an Economic Union. Both the loss of control over monetary policy and the restraints on the use of fiscal policy for countries entering the EMU are sources of concern about the possibilities of stabilizing fluctuations affecting the members of the Union. br/ Furthermore, attention is given to stabilization and labour market policies. The contribution of labor market institutions to automatic stabilizers is often advocated. Post World War II institutions have brought protection to employment, wages and unemployed substitution revenues which involve stabilization of actual income. Recent institutional changes towards more labor market flexibility, mainly motivated by efficiency purposes, may be costly in terms of stabilization. br/ The final part is on empirical evidence, recent trends and problems in stabilization. It is devoted to empirical studies of the stabilization effect of alternative fiscal policies, emphasizing the experience of European countries in the 1990s.

Inhalt
I Fiscal Policies, Business Cycle and Growth.- 1 An Exploration Into the Effects of Dynamic Economic Stabilization.- 2 Optimal Public Spending in a Business Cycle Model.- 3 Welfare, Stabilization or Growth: A Comparison of Different Fiscal Objectives.- 4 Public Investment, Stabilization and Growth.- II Automatic Stabilizers in an Economic Union.- 5 Monetary Union and the Role of Automatic Stabilizers.- 6 The Efficiency of National and Regional Stabilization Policies.- 7 Insurance Against Asymetric Shocks in a European Monetary Union.- 8 Automatic Stabilizers in a European Perspective.- III Stabilization and Labour Market Policies.- 9 The Cyclical Effects of Labour Market Policy.- 10 Financing Unemployment Benefits in the Business Cycle: Stabilization, Welfare and Equity Issues.- IV Empirical Evidence, Recent Trends and Problems on Stabilization.- 11 Are Automatic Stabilizers Still Effective? The French Case in the Nineties.- 12 Output Stabilization Versus Deficit Sustainability: Is it a Trade-Off ?.- 13 The Effects of Fiscal Policy and the Maastricht Solvency Criteria on European Employment.- 14 Macroeconomic Effects of Fiscal Restructuring in Europe.