IMF Working Papers

The Extent and Composition of Automatic Stabilization in EU Countries

By David Coady, Silvia De Poli, Adrián Hernández, Andrea Papini, Alberto Tumino

May 12, 2023

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David Coady, Silvia De Poli, Adrián Hernández, Andrea Papini, and Alberto Tumino. The Extent and Composition of Automatic Stabilization in EU Countries, (USA: International Monetary Fund, 2023) accessed November 4, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper analyses the magnitude of automatic income and demand stabilization in EU Member States between 2011 to 2019. Our analysis finds that automatic income stabilization in 2019 averaged 41.3 percent at the EU level, with considerable variation among Member States. While the extent of stabilization is similar across income groups within countries, the source of stabilization differs, with income taxation (transfers) being more important for high-income (low-income) households. Income stabilization proved stable over time, with a few exceptions driven by major reforms. EU-level demand stabilization averaged 84.7 percent, increasing with household income and reflecting the greater ability of richer households to smooth consumption.

Keywords: Demand stabilization, Euromod, Income stabilization

Publication Details

  • Pages:

    31

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2023/103

  • Stock No:

    WPIEA2023103

  • ISBN:

    9798400243394

  • ISSN:

    1018-5941