Fiscal Targets, Automatic Stabilisers and their Effects on Output

• Author(s): Barrell, Ray ; Hurst, Ian ; Pina, Álvaro
• Date: 2002
• Persistent ID: http://hdl.handle.net/10400.5/2737
• Origin: Repositório da UTL
• Subject(s): automatic stabilisers; Stability and Growth Pact; fiscal targets; public investment
• Document Type: Other
• Language: English

Description

In this paper we review the European macroeconomic policy framework, and address the issue of setting safe deficit targets - targets that make it very unlikely that a country exceeds the 3 per cent ceiling of the Stability and Growth Pact. In this context, the scope for an increase in public investment is discussed. We also look at automatic stabilisers and argue that their ability to smooth output depends on the kind of disturbance that hits the economy.