Automatic Stabilizers in an Economy with Multiple Shocks

Expansionary macroeconomic policy with a strong redistributive component is an attractive proposition, most recently launched on the basis of Modern Monetary Theory or MMT. The Theory is a synthesis of familiar ideas, newly relevant but scarcely path-breaking. Its basics – Chartalist or fiat money, functional finance, and models based on consistent national accounting – come straight from Maynard Keynes, Abba Lerner, and Wynne Godley. Functional finance is the heart of fiscalist Keynesianism built upon automatic stabilizers for the business cycle. MMT’s job guarantee proposal is one more stabilizer which could be a modest helpful supplement to the system which exists. National accounting comparisons of a possible MMT package with the 2008 crash and the Trump tax cut are presented with emphasis on autonomous shifts in demand. The package could have problems with debt sustainability and external balance. Inflation is unlikely if wage repression in the USA is not reversed. But strong wage increases are presumably a goal of MMT.

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The role of automatic stabilizers in business cycle: the case of indonesia

European Journal of Government and Economics ◽

10.17979/ejge.2021.10.2.7366 ◽

2021 ◽

Vol 10 (2) ◽

pp. 167-184

Author(s):

Haryo Kuncoro

Keyword(s):

Fiscal Policy ◽

Standard Model ◽

Policy Instrument ◽

Economic Stability ◽

Fiscal Stimulus ◽

Quarterly Data ◽

Discretionary Fiscal Policy ◽

The Impact ◽

Automatic Stabilizers

TThe use of large fiscal stimulus packages to dampen the impact of Covid-19 recently has raised concerns about the effectiveness of the discretionary fiscal policy. This paper aims at analysing the feasibility of automatic fiscal stabilisers to mitigate economic fluctuations in the case of Indonesia. Using the IMF standard model for quarterly data over the period of 2001(1) to 2019(4), we find that the role of automatic fiscal stabilisers is getting greater both in revenue and spending. This implies that the automatic fiscal stabilisers are feasible as the main fiscal policy instrument for economic stability goals in the future. However, given the existing circumstances, Indonesia has to reform economic, regulatory, and institutional ecosystems in adopting the automatic fiscal stabilisers.

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Multiple shocks around the low-luminosity protostar IRAS 16293-2422

Astronomy and Astrophysics ◽

10.1051/0004-6361:20010662 ◽

2001 ◽

Vol 375 (1) ◽

pp. 40-53 ◽

Cited By ~ 38

Author(s):

A. Castets ◽

C. Ceccarelli ◽

L. Loinard ◽

E. Caux ◽

B. Lefloch

Keyword(s):

Multiple Shocks

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Eine Gabe an St. Nimmerlein? - Zur zeitlichen Dimension der Schuldenbremse

Perspektiven der Wirtschaftspolitik ◽

10.1111/j.1468-2516.2010.00335.x ◽

2010 ◽

Vol 11 (3) ◽

pp. 246-259 ◽

Cited By ~ 3

Author(s):

Friedrich Heinemann

Keyword(s):

Disposable Income ◽

The European Union ◽

Northern European ◽

Current Economic Crisis ◽

Automatic Stabilizer ◽

The Us ◽

Income Shock ◽

Large Heterogeneity ◽

Automatic Stabilizers ◽

The Eu

AbstractThis paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We consider two scenarios: a proportional income shock and a shock on employment which increases the rate of unemployment.We find that automatic stabilizers absorb 38 per cent of a proportional income shock in the EU, compared to 32 per cent in the US. In the case of an unemployment shock 48 per cent of the shock is absorbed in the EU, compared to 34 per cent in the US. Under the assumption that only credit constrained households adjust current spending on consumption goods to current disposable income, the cushioning of disposable income leads to a demand stabilization of 26 to 35 per cent in the EU and 19 per cent in the US. There is large heterogeneity within the EU. Automatic stabilizers in Eastern and Southern Europe are much lower than in Central and Northern European countries. With respect to income stabilization, Germany is above the European average for both scenarios. Demand stabilization in Germany is weaker because the number of liquidity constrained households is below the EU average.

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