Automatic Fiscal Stabilizers

By Steven A. Symansky, Thomas Baunsgaard

September 28, 2009

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Steven A. Symansky, and Thomas Baunsgaard. Automatic Fiscal Stabilizers, (USA: International Monetary Fund, 2009) accessed December 26, 2024

Summary

This paper discusses how to enhance automatic stabilizers without increasing the size of government. We distinguish between permanent changes in the parameters of the tax and expenditure system (e.g., changes in tax progressivity) that will enhance the traditional automatic stabilizer, and temporary changes triggered by certain economic developments (e.g., tax measures targeted at credit and liquidity constrained households, triggered during a severe downturn). We argue that, with some exceptions, the latter are preferable as they can be implemented with lower disruptions in other fiscal policy goals (e.g., economic efficiency). Moreover, countries should also avoid introducing procyclicality as a result of fiscal rules, as these would offset the effect of existing automatic stabilizers.

Subject: Automatic stabilizers, Expenditure, Fiscal policy, Personal income tax, Social security contributions, Tax allowances, Taxes, Unemployment benefits

Keywords: Africa, Automatic stabilizer, Automatic stabilizers, Country, Expenditure rule, Fiscal policy response, IMF government finance Statistics, Income tax, Personal income tax, Policy package, Rate schedule, Social security contribution rate, Social security contributions, SPN, Tax, Transfer program, Unemployment benefits

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Staff Position Note No. 2009/023
Stock No:

SPNEA2009023
ISBN:

9781455290567
ISSN:

2617-6742

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