In a New Keynesian DSGE model with non-Ricardian consumers, we show that automatic stabilization according to a countercyclical spending rule following the idea of the debt brake is well suited both to steer the economy and in terms of welfare. In particular, the adjustment account set up to...

The global financial and economic crisis has revived the debate in the academic literature and in policy circles about the size and effectiveness of automatic fiscal stabilizers. Especially in the euro area where monetary policy is centralized and discretionary fiscal policy making is...

With an overindebted public-sector, Brazil has been on the brink of a fiscal dominance problem for quite a long time. The term has been usually associated to a situation in which monetary policy becomes subordinated to fiscal needs. This paper calls attention to broader implications of prolonged...

This paper proposes an approach to assess the extent of automatic fiscal stabilisation of aggregate household disposable income after a specific shock. The approach is based on the national account identity of household disposable income and elements of the OECD methodology to cyclically adjust...

It is often argued that fiscal stabilisation in the euro area compares unfavourably with the US, not least because of the perceived limitations of the Stability and Growth Pact. This paper qualifies this perception by taking a closer look at fiscal policy making since the mid-1990s. It examines...

After a brief introduction dealing with critical opinions of some economists on the European austerity policy, the authors point out that austerity as a means of achieving fiscal consolidation and financial stability is applied when the fiscal domain is weak. After analyzing the effects of the...

The need for fiscal consolidation and sustainability is one of the key macroeconomic issues confronting Indian economy. This paper attempts to understand India's current fiscal situation, its likely future development, and its impact on the economy in the context of a weak global recovery from...

This paper quantifies the effects of two short-run fiscal policies, a temporary tax cut and a temporary rebate transfer, that are intended to stimulate economic activity. A reduction in income taxation provides immediate incentives to work and save more, raising aggregate output and consumption....